Institutional investment in exchange-traded funds (ETFs) is growing due in large part to the versatility of the funds, according to a new report from Greenwich Associates. US institutions are incorporating their use into an expanding range of portfolio functions and asset classes, it says.
Greenwich Associates says it has documented the use of ETFs by institutional investors for the past five years. In a new report entitled, Institutional Investment in ETFs: Versatility Fuels Growth, it examines the underlying trends and developments driving their continuing growth, identifying no fewer than five primary drivers:
Existing institutional users are finding new applications for ETFs in their portfolios, and growing numbers are using ETFs as a primary vehicle to implement long-term strategies.
ETFs are taking on a larger and more important role in institutional fixed income portfolios.
Institutions are using ETFs alongside derivatives.
Innovative ETF strategies and approaches are gaining traction among institutions and asset managers offering increasingly popular multi-asset-class funds are using ETFs to fully implement strategies or scale their products.
Insurance companies are adopting ETFs as a means of investing both surplus and reserve assets.