Icahn has a net worth of $23bn and is the founder, Icahn Capital Management
Carl Icahn has a net worth of $23bn and is the founder, Icahn Capital ManagementReuters

Billionaire investor Carl Icahn has slammed the world's largest asset manager BlackRock, saying that it creates an "extremely dangerous" situation by encouraging debt issuance.

"They sell liquidity. There is no liquidity. That's what's going to blow this up," Icahn said, while debating the merits of activist investing with Blackrock chief executive Larry Fink at the Deliverying Alpha conference by CNBC and the Institutional Investor.

"I'm not blaming Larry personally. I'm blaming BlackRock," Icahn said.

He described BlackRock as an "extremely dangerous company", because of the prevalence of its exchange-traded fund products, which he deems illiquid, according to Reuters.

Icahn said when the Federal Reserve hikes interest rates, investors would likely sell their high-yield ETFs, and that he feared the consequences of such a sell-off as there would not be anyone to buy them.

Icahn has said previously that the high-yield bond market was in a bubble.

The US ETF market has roughly $2.1tn (£1.34tb, €1.92tn) in assets, according to ETF.com

Fink however said Icahn's description of the ETFs were "dead wrong" and that the index funds were just "a tool for buying exposure." He also said that ETFs "create more price transparency than anything in the bond market today," especially in high-yield.

He added that higher interest rates would result in more money flowing into the bond market, reiterating that the Federal Reserve is likely to raise rates in September.

He believes a normalisation of the Federal Reserve rates would be good for the economy.

BlackRock had $4.7tn (£3tn, €4.3tn) in assets under management at the end of the second quarter this year.