SEM217: Ananth Madhavan, Blackrock

Tuesday, February 23rd @ 11:00-12:30 PM (ONLINE)

Using Modern Data Science to Identify ETF Model Followers

Ananth Madhavan, Blackrock

ABSTRACT: Investors seeking low cost, automated, and tax aware solutions are increasingly turning to model portfolios that use exchange-traded funds (ETFs) as building blocks to achieve specific investment objectives. There is no regulatory requirement to track ETF model portfolio assets, flows, and performance. We use data science to identify models based on ownership data looking for clusters of individuals whose proportional portfolio holdings are virtually identical. The algorithm yields new insights into the model portfolios. Relatively stable asset allocations for model portfolios, together with rebalancing flows, yielded higher returns and lower risk relative to non-model followers during the Covid-19 crisis.

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