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ETF investors showing big influence over fund industry

Althea Chang
Big Data Download

Investors in exchange traded funds appear to be more cautious that investors in other funds, and they're causing bigger shifts in the fund industry than some might expect, according to one analyst.

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"There's quite a bifurcation going on between how ETF investors behave and how open-end fund investors behave," noted Bob Jenkins, global head of research at Thomson Reuters Lipper. "In general, the ETF space ... is about one-tenth of the overall assets under management in the fund industry. And yet it has such sharp and dramatic swings that it can basically drive the entire industry for any given week or month," he said.

ETF investors have been responding quickly to news headlines and macroeconomic events, from Detroit’s bankruptcy to Federal Reserve Chairman Ben Bernanke’s comments on quantitative easing, Jenkins told "Big Data Download."

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"We're seeing what's probably more of an institutional mindset, really reacting very quickly to what's going on in the markets," Jenkins said. "When you see these kind of large flows and knee-jerk reactions, it presents opportunities for folks who look at individual securities." That's because strong stocks get caught up in fund flow swings, Jenkins explained.

"If you are in individual securities analyst, you might want to sharpen your pencil," Jenkins said.

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