A new study conducted by Greenwich Associates and sponsored by BlackRock (BLK), the world’s largest asset manager, indicates institutional usage of exchange traded funds is growing and will continue to do so. BlackRock is the parent company of iShares, the world’s largest asset manager.
The study shows 46% of institutional ETF investors surveyed allocate 10% or more of total assets to ETFs with 47% saying they expect to boost ETF usage over the next year.
“About 30% of institutional ETF investors report ETF allocations in the 10% to 25% range. RIAs, who are the largest users of ETFs by assets, have the largest ETF allocations with 41% of RIAs investing more than 25% of total assets in ETFs,” according to the study.
Institutional investors are also increasing that strategic use of ETFs with the Greenwich study showing “63%of all survey respondents describe their ETF usage as strategic, up from 58% in 2013. This is remarkably different than in 2010, when approximately 20% of institutional ETF investors said they employed ETFs to implement strategic or long-term investment decisions.”
Nearly half of survey participants report holding ETFs for two years or longer, up from 36% last year. “Among institutional investor types, 66% of pension plans’ strategic usage is up sharply from 47% in 2013,” notes the study.
There is some anecdotal evidence that some pension funds are paring exposure to ETFs. For example, it was reported last week that the New Jersey Pension Fund has dramatically slashed its stake in the Vanguard FTSE Emerging Markets ETF (VWO) . However, the fund still maintains positions in the iShares MSCI EAFE ETF (EFA) , iShares Core MSCI Emerging Markets ETF (IEMG) and the iShares MSCI South Korea Capped ETF (EWY) , according to the New Jersey Division of Investment. [Pension Reduces EM ETF Exposure]
Earlier this year, the first U.S. fixed income ETF study by independent research firm Greenwich Associates and sponsored by BlackRock indicated increased usage of bond ETFs at the institutional level. The newest survey confirms as much. [Institutions Boost Bond ETF Usage]
“Over the past 12 months, the share of asset manager ETF investors employing fixed income ETFs significantly increased. The biggest and potentially most important increase occurred in domestic fixed income, where the share of asset managers jumped to 72 % in 2014 from 30% in 2013. For international fixed income, in 2013, asset managers reported virtually nothing in the way of ETF. In 2014, nearly half of asset manager ETF investors are employing the vehicles in that asset class,” according to the survey released Monday.
The new Greenwich survey says over 80% of asset managers favor ETFs for tactical applications and adjustments within client portfolios. That jibes with data from previous surveys highlighting increased usage of smart beta ETFs by institutions. [Institutions Increase Smart Beta ETF Exposure]
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of EEM, EFA and IEMG.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
- Investment & Company Information
- Greenwich Associates
- asset manager