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Dave Nadig
3:29
So short of tracking it by hand every day from our tool, I don't have a free solution for you.
(FWIW, there are real decisions about timing you have to make to get apples/apples, which is why sometimes you'll see different sources disagree on a given time period).
Guest
3:30
What do you think of using net flows for ETFs, for example, net flows into cyclical versus non-cyclical sectors, to gauge investor interest in those sectors?

In other words, would large net inflows for financial sector funds be indicative of optimism about the sector?
Dave Nadig
3:31
So to be super specific.
The flows represent when there's been enough buying or selling to create an arbitrage for the AP to make or get rid of shares.
So in that sense, flows is a reasonable measurement of "buying pressure" or "selling pressure"
3:32
You can have ENORMOUS volumes -- a measurement of interest -- and very little flow, which implies buyers and sellers are finding a matched price a lot.
So short answer -- yes, its indicative of that buy/sell pressure.  BUT....
3:33
because of a lot of nuances in how the data is reported, I would only every look at this over a decent time horizon -- weeks, or a month for instance.
on a day to day basis, the data is subject to all sorts of noise.
3:34
for instance, Elisabeth Kashner at FactSet wrote a great piece on how you can find paired creation/redemption activity offset by a few days that don't represent anything around sentiment, but are mechanical offsets from index rebalance trades.
those wash out over a week or a month, but if you looked a day you would erroneously think "Everyone's in!" and then "they all left!"
great question.
StephCurrie
3:35
Could you explain what the yield on an equity ETF is, is that the dividend?  You can ask stupid questions, right?
Dave Nadig
3:36
No stupid questions!
So, generally there are TWO yields for an equity fund.  The one you generally care about is "Distribution Yield" which imagines, say, SPY, as if it were a stock.
So SPY's distro yield is ...
1.81%
3:37
that means on a trailing basis, you got $1.81 in dividends for your $100 investment, same way you'd think of MSFT dividends.
If you click on the "Fit" tab for SPY though.
you'll see a different yield, which is the portfolio yield.  That's the trailing 12 month dividends of everything the fund holds.
3:38
Why don't they match? Well, holdings change! Whether rebalances, or just cash positions, and so on.
they rarely if ever match perfectly.
Invisible Octopus
3:38
Do the wirehouses have to disclose their relationships with the fund companies? Where can I find that info?
Dave Nadig
3:38
Nope!  Would be nice if they did, but I have never found any source.  There are a few ways it plays out ...
3:39
Fund companies can rebate back to a broker for presence in a no-transaction fee program (say, an issuer pays schwab 25 basis points on assets there, to be in their NTF program).
3:40
They can simply write a check as part of a marketing arrangement (Here's $50,000, we'd like to be on your select list).
They can also do much "softer" things like support conferences (Here's $50,000, we'd like to be the silver sponsor of your annual event).
How clean and obvious those relationships are is a subject of a lot of debate and discussion.
3:41
But if you're the wirehouse customer -- ASK!  You are the customer after all.  Perhaps they'd tell you!
(Note: there are rules about some of this, that are enforced by FINRA, so it's not a complete wild west. But disclosure?  Not so much).
Guest 2
3:41
Since ETFs' holdings are transparent, how do you feel about shadow investing based on viewing the underlying positions of the ETF.  Say, an actively managed ETF that has 15 holdings.  Rather than paying the high expense ratios, just shadow the holdings and save on costs?
Dave Nadig
3:42
Well, this is certainly the argument that active portfolio managers will make when they explain why they don't disclose their traditional mutual fund portfolios.
For the most part - I don't believe it.
3:43
If you think Jane Doe is such a genius that her active 15 stock portfolio will outperform, you probably believe not only in her stock selection, but in her timing.
So, if you REALLY want to check in every day and see if she decided to dump AAPL yesterday, well, I guess more power too you.
3:44
However, it's worth nothing that by convention, ALL reported holdings are actually lagged.  So if she sells RIGHT NOW, tonights portfolio wont actually even show the sale.  That shows up the next day.
(thats not an ETF thing thats a mutual fund convention we all inherit).
So you sort of have to believe timing doesn't matter much, at which point, I guess, sure, you could shadow her.
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