Two or three years ago, institutional investors primarily used ETFs for tactical purposes, holding them for less than one year. But now they are using them strategically as well, according to the 2013 Greenwich Associates study of trends in institutional usage of ETFs, which was sponsored by iShares.

Institutional investors are now evenly divided in reporting their ETF use as strategic or tactical, with the most commonly-reported usage being passive exposure in core strategies, the survey found.

One U.S. institutional fund executive quoted in the study put it this way: “Initially, it was a transition strategy. It kind of grew beyond that into a liquidity strategy because it was a convenient place to have some money in case we needed cash to pay benefits. It developed into much more of a diversification plan at this point.”

Assets flowing into ETFs are still most likely to go to domestic and international equity funds; however, insurance companies and RIAs demonstrate strong commitment to domestic fixed-income ETFs, the Greenwich study found.

“Decreased fixed-income bond liquidity has driven institutional investors to explore new ways to access fixed-income markets,” said Matthew Tucker, Head of iShares Fixed-Income Investment Strategy at BlackRock. “Fixed-income ETFs are increasingly being used by investors to access liquidity and implement investment strategies.”