Institutional investors are increasingly turning to exchange-traded funds for their investment needs, according to a new Greenwich Associates study.
Specifically, the study, which is sponsored by iShares, reports that a significant number of institutional investors use ETFs for manager transitions and cash equitization management. Seventy-eight percent of asset managers and 44% of pensions, foundations and endowments use ETFs for cash equitization, and 61% asset managers and 55% of institutional funds use ETFs for manager transitions.
"The Greenwich Associates study confirms the wide range of ETF usage we hear from and discuss with our institutional clients," stated Daniel Gamba, Head of Americas iShares Institutional Business at BlackRock. "Institutional investors are expanding the types of ETF applications with a marked increase in liquidity management and portfolio completion."
Other findings in the study include: 31% of institutional funds and one-third of asset managers are now employing ETFs as part of an ETF overlay or sleeve to add liquidity to a portfolio and/or to reduce implementation and trading costs. That usage rate is up from just one in 10 among both groups in 2011.
This year, 28% of asset managers and 42% of institutional investors use ETFs for portfolio completion. Last year, approximately just one-in-five institutional investors used ETFs for portfolio completion.
The Greenwich Associate study also identified iShares as the most widely used ETF provider by institutional investors. Among participants, nearly 90% of institutional investors and asset managers identified iShares ETFs as among their portfolio holdings.
The study was conducted between February and April 2012 through live, one-on-one interviews between Greenwich Associates and representative of U.S. pensions funds, endowments, foundations and asset management companies. All participants were from organizations that include ETFs among their portfolio holdings.