Anyone concerned about Barclays and their ishares holdings?

Discussion in 'ETFs' started by dave74, Jan 23, 2009.

  1. dave74


    If Barclays goes bankrupt, does anyone know what will happen to the ishares? I use alot of ishares in my trading.

    Just be safe, I'm gonna sell all my ishares for now.

    Any responses are greatly appreciated.
  2. Dave, I'm fairly out of the loop when it comes to rumors, etc. but my company is in the business (both mutual funds & ETFs) and our mutual funds hold some iShares. I asked the Portfolio Managers and they said they were not worried at all and would continue to use iShares. Techniclly speaking, they are all under a Trust which is very protected from the Asset Manager (Barclays). In my personal opinion - the worst that you'd see happen is another company come in and start to manage iShares, and in the transition you might see some tracking errors. If they start replacing fund managers that MAY be a tell-tale signal for you.

    Look at it like iShares is you (the shareholder) and Barclay's is the Asset Management Firm.

    As a shareholder if your Asset Management firm goes belly up just hire another one. The shares will still be out on the market, trading, pricing, etc.

    I'm not in any way reccomending an investment product, meaning I'm not saying I think you should stay with iShares or I think you should sell out. I work for an asset management firm - we mostly manage ETFs and Mutual Funds. If we were to go belly up the Board of Directors of the Fund's Trust would just choose to go out and hire a different asset manager. The Mutual Funds and ETFs would still be there and open as long as there is demand.

    Again, not giving any investment advice, in my opinion the only time you have to worry about a product like an ETF is if you start to see volume go WAY down and asset levels drop, then if there is no demand for that product, the Trust would probably decide to close the fund/no longer offer.
  3. dave74


    Thanks for that reply. I do feel better about ishares now knowing that professionals are not at all worried about Barclays going bankrupt. I still have in the back of my mind, "what if", but I do feel alot more confident.

    Thanks again.
  4. Dave - there is a difference between ETNs and ETFs. If iShares/Barclays has any ETNs I would caution you because there is a risk there. Lehman had trouble with their ETNs IIRC.
  5. You have nothing to worry about if you're short, LOL!!!!

    ETNs and Credit Risk
    ETNs offer many advantages, notably absence of tracking error, lower taxes and coverage of markets where no other coverage exists or coverage is inadequate. However, for investors who are concerned about safety of principal, these benefits may be outweighed by the fact ETNs are debt obligations and investors can lose all or most of their investment if the provider goes bankrupt.

    Most ETN issuers are large financial institutions with investment-grade credit ratings, so the risk of default is normally negligible. But during the credit crisis of 2008, the risk became quite elevated. In fact, the worst-case scenario unfolded when Lehman Brothers collapsed and its line of Opta ETNs was delisted from the stock exchange. Investors may receive only pennies on the dollar once bankruptcy trustees disburse the dealer's assets. (For more on the credit crisis, see the Financial Crisis Survival Guide.)

    Other providers avoided Lehman Brothers' fate but still had periods during which their solvency was questioned, causing their ETNs to plunge in price as investors rushed for the exits. Prices rebounded after the fears subsided, but investors who sold during the plunge realized significant capital losses. (As soon as you invest in a company, you face this risk. Find out what it means in An Overview Of Corporate Bankruptcy.)

    ETF investors have no credit risk because they own a pro rata interest in a basket of securities held in trust; these are legally separate from the assets of the provider. If the ETF provider goes bankrupt, the basket of securities will be returned to investors, not creditors.
  6. =========================
    Helpful discussion.

    No matter how much central banks help banks[the main trend, but not a prediction]Looks like the market thinks a bit more of Barclays then Citigroup downtrend

    However I am a believer in diversification in location, reguardless
  7. As you should be - individuals should be as worried about counterparty risk as institutions.