Advising the Advisors: Evidence from ETFs

45 Pages Posted: 7 Dec 2021 Last revised: 19 Dec 2022

See all articles by Jonathan Brogaard

Jonathan Brogaard

University of Utah - David Eccles School of Business

Nataliya Gerasimova

BI Norwegian Business School

Ying Liu

Shanghai University of Finance and Economics - Department of Finance

Date Written: November 27, 2021

Abstract

Asset managers play a dual role by simultaneously managing funds and increasingly providing investment model recommendations to third-party financial advisors. Using a novel data set on recommendations by ETF issuers and strategists, we show that the $4.8 trillion recommendation market has a substantial impact on ETF flows. Model providers recommend their affiliated ETFs more frequently. These funds tend to have higher fees and lower performance than recommended unaffiliated ETFs. In addition, investors following the recommendations exhibit weaker sensitivity to funds’ returns. We fail to find evidence that recommendations are driven by private information about the future performance of affiliated funds.

Keywords: Exchange-traded funds, Recommendations, Institutional Asset Management, Financial Advisors, Model Portfolios

JEL Classification: G11, G23

Suggested Citation

Brogaard, Jonathan and Gerasimova, Nataliya and Liu, Ying, Advising the Advisors: Evidence from ETFs (November 27, 2021). Available at SSRN: https://ssrn.com/abstract=3972562 or http://dx.doi.org/10.2139/ssrn.3972562

Jonathan Brogaard

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

HOME PAGE: http://www.jonathanbrogaard.com

Nataliya Gerasimova (Contact Author)

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

Ying Liu

Shanghai University of Finance and Economics - Department of Finance

Shanghai, 200433
China

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