In this paper, we use the transparency afforded by ETFs to analyze investor flows, but also look through to the underlying holdings, to understand the time-varying preferences of passive investors.
We have found that year on year, there is a great deal of variability in style, industry and regional exposures. However, these exposure preferences tend to be neutral over longer time frames. This is in contrast to a consistent preference for performance, reflected by flows going towards ETFs with strong in-year returns.
