ETF companies have been associated with flash crashes, Wall Street bankruptcies and reckless market bets. What could possibly go wrong next? The good news is, probably nothing too drastic. After all, ETFs have already weathered quite a bit of uncertainty in their now-decades-old history.
"We really went through a time period that put ETF structures to the test," said Jim Wiandt, CEO of ETF.com. He meant 2008 and 2009, when Lehman Brothers was going down—and taking with it the most widely tracked indexes in the fixed-income ETF space. There were exchange traded notes (ETNs) with full credit exposure to banks on the verge of bankruptcy (including Lehman).
This isn't to say ETFs don't have pressure points, especially the bigger the industry gets. The biblical apocalypse had four horseman; ETFs have four major risk factors, according to the experts. Here they are.