How institutional investors use ETFs

Institutional investors are embracing ETFs, says a study by Greenwich Associates.

“Given the simplicity and flexibility of exchange traded funds…institutional investors are turning to ETFs more regularly to achieve investment goals,” says Greg Walker, managing director and head of iShares Institutional Business at BlackRock Canada.

According to the survey, institutions are extending their use of ETFs from tactical functions to more active strategic purposes. There’s also been a shift from equities to fixed income and other asset classes within the space, which is consistent with how funds are uses in the U.S.

And of those already regularly using ETFs in their existing portfolios, 45% of institutional funds and 31% of asset managers intend to increase allocations and move more assets to the funds by 2014.

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The study adds more than 70% of institutional investors employ ETFs in equities, with funds using equity ETFs most widely for Canadian and U.S. equity exposures. The majority (83%) of asset managers, on the other hand, use equity ETFs to gain international market exposure, putting it ahead of domestic and U.S. equities.

Read: Use this moderate-risk ETF portfolio for steady growth

Other highlights include:

• Half of institutional funds and 45% of asset managers use ETFs in domestic fixed income
• And nearly a third (28%) use them for international, fixed-income exposure.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.