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Dan Rohinton's picture
Submitted by Dan Rohinton on

Rob, thanks for your interest and support.

On Monday the arbitragers who provide liquidity (through derivatives in some situations) shut down as volatility picked up. This meant investors had a difficult time selling their "liquid" ETF. The remaining arbitragers who still offered liquidity increased their pricing significantly (bid-ask spreads expanded) so they actually expanded the discount on NAV by design at the expense of ETF owners. This explains how the S&P 500 fell 6% intraday at its peak but ETFs promising liquid S&P 500 exposure fell over 20% at that same time.

During those intraday lows over $300 million in trading took place in those ETFs I highlighted. This was a permanent and significant loss for the investors who sold at a material discount to the stocks they thought they owned. As a Cambridge unitholder you own a specific stock directly along with active management of our holdings and cash. This helped protect our funds against the significant volatility on Monday and provided us with an opportunity to deploy cash during the market dislocation.

Best,
Dan

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