If a billionaire wanted to invest $1B in an ETF without affecting the price too much, how could they do it?

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A billionaire looking to invest $1 billion in an ETF without significantly impacting the price could use several strategies:

  • Break the investment into smaller trades: Instead of making one large transaction, the investor could break the $1 billion into smaller trades spread out over time. This would minimize the market impact by avoiding large spikes in demand.
  • Use an algorithmic trading strategy: Algorithmic trading systems like VWAP (Volume Weighted Average Price) or TWAP (Time Weighted Average Price) can automatically execute trades in smaller chunks over a set period to minimize market disruption and maintain anonymity.
  • Work with a block trader: A block trader or institutional desk can help facilitate large transactions off the public exchange, reducing the impact on the ETF’s price.
  • Target high-volume ETFs: Investing in ETFs with large assets under management and high daily trading volumes can absorb the investment with minimal price disruption.
  • Pre-arranged trades: The investor can arrange block trades with other large holders or institutions willing to take the opposite side of the transaction, reducing market pressure.
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These approaches help distribute the investment across time and market participants, keeping price fluctuations to a minimum.