Exchanged-traded funds create "wild gyrations" that make investors "nervous and uncomfortable," Barry Sternlicht, chairman and CEO of Starwood Capital Group, told CNBC on Thursday.
"These ETFs are creating havoc in the stock market," he said in a "Squawk Box" interview, explaining that it's tough for individual stock pickers when entire sectors are bought and sold "without discrimination between stocks in a sector."
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"All the residential mortgage REITs got killed [recently] when people thought rates were going to rise," added Sternlicht, one of the world's largest real estate managers. "We have a commercial mortgage REIT. We sold with them only because the ETFs were selling. So it's program selling."
He added, "Individual investors today are so nervous. 'Oh my God, there must be something going on.' No, it's just the rebalancing of ETFs. We've seen that in gold. It creates wild gyrations and it makes people nervous and uncomfortable."
While Sternlicht's focus is on real estate, he said he does trade stocks but has avoided fixed income, which is "not a smart place to be. Look at the REITs in the last two weeks, they were off more than 10 percent."
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He advised investors to think long term. "[Go] 99 percent equities. Let it ride."
"You pick your spots," he continued, "there are some stocks that are oversold."