, Columnist
Investors, Not Banks, Could Spark the Next Crisis
Valued for their simplicity, exchange-traded funds pose worrying risks.
Passive funds have skyrocketed in popularity.
Photographer: Michael Nagle/Bloomberg
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Banks must bear much of the blame for previous financial crises. In the next one, ordinary investors could play a more central role.
Ironically, they’ll do so through vehicles created with them in mind — exchange-traded funds, or ETFs. These listed funds are passive by nature, designed to track the performance of an index of stocks, bonds, currencies or commodities rather than to pick and choose among individual companies.