Due to their built-in transparency, the exchange traded fund investment vehicle helps the market discern the trading views of investors as a whole and even large institutional-sized executions.

Anyone can scrutinize the flows in aggregate or individually, by fund sponsor or index provider, by size or sector, by asset class and geography, among others, reports Air I. Weinberg for Pensions & Investments. [September & Q3 ETF Performance Report]

For instance, we can see how investors reacted to Vanguard’s shift to FTSE index-based ETFs by comparing asset flows to comparable MSCI index-based ETFs.

However, investors should not confuse sentiment with flow data that can be traded on as an observer would have to separate sentiment with activity in the primary market – ETF shares are swapped around in the secondary market, but cash and securities flow in and out of ETFs in the primary market.

In an attempt to reveal institutional behavior, BlackRock has started the BlackRock Risk Sentiment Measure based on monthly flow from all U.S.-listed ETPs. The company is still working out the kinks.

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