NEW YORK (ETF Expert) -- A do-it-yourself investor would be wise to track institutional money. Are there surprising, or not so surprising, moves that advisers make via their block trades?
Often, the activity will give you the heads-up if advisers like myself are on their way to a party before the rowdier guests arrive. Similarly, tracking block allocations might tell you whether or not advisers, asset managers and/or hedge fund gurus are leaving an enthusiastic celebration early to watch digitally recorded episodes of Breaking Bad.
For example, PowerShares Emerging Market Sovereign Debt (PCY) has caused more portfolio pain than portfolio pleasure in 2013. Fortunately, for clients who had owned PCY, we minimized loss with stop-limit orders during the May-June rout of higher-yielding income assets.
PCY had served us so well since 2009. Shortly after Federal Reserve Chairman Ben Bernanke's taper talk on May 22, however, our mechanical and unemotional sell discipline removed the asset from our accounts. Then, in September, the 10-year yield tickled 3%, while the Federal Reserve backtracked on its anticipated policy change. Ever since, yield sensitive assets have been gaining ground. In fact, for the past few days, PCY has picked up more than 100 million in assets on twice the average trading volume.Courtesy of StockCharts.com Granted, there are technical traders who dumped PCY by the hundreds of millions when it crossed below the 50-day trendline back in May. So it stands to reason that many of those same technical traders have re-entered PCY -- now that the asset has crossed back above a 50-day here in September. Others may be intrigued with the 5% annualized yield delivered monthly in an environment where the Fed may not slow their bond-buying after all; still others may regard the spread between emerging market debt and comparable U.S. government debt as attractive. By way of additional disclosure, I have not added PCY to client accounts. My yield-oriented moves for clients after the Fed decision have concentrated on muni debt, including SPDR Nuveen Barclays Muni (TFI) and SPDR Nuveen Short Term Muni (SHM). I have added to held-to-maturity high yield (i.e., Guggenheim BulletShares Series) as well as senior bank loan assets like PowerShares Senior Loan (BKLN). Yet, whatever the reason for the new-found interest in PCY, individual investors should recognize recent changes in institutional fund flow.
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