Exchange traded funds provide the average retail investor the ability to trade and access markets that were once beyond their reach. Institutional investors have also taken notice of the investment vehicle’s benefits and are now the most prolific users of the fund product.

According to a recent Deutsche Bank research note, institutional investors held 53.0% of all ETF assets, with investment advisors and brokers holding 47.7% and 38.0% of institutional assets, respectively, as of the last quarter of 2011 while retail investors held 47.0%. They might not want you to know it, but mutual funds and hedge funds also accounted for 5.2% and 4.1% of institutional ETF assets, respectively. [More Hedge Funds Tap ETFs]

The widespread use of ETFs among institutional investors has been steadily rising from below 30% in early 2000 to over 50% over the last few years, with more than 2,545 institutional investors owning ETFs at the end of 2011 compared to 405 in 2000.

“Overall, we found that institutional participation was higher in ETFs offering exposure to equity or fixed income with no leverage, large assets under management, abundant turnover, high flows activity, low total expense ratios, tight bid/ask spread, and high short interest-related figures,” the bank said.

According to Deutsche Bank data, investment advisors and retail investors are primarily using ETFs as portfolio holdings for either tactical or strategic asset allocation.

ETFs have experienced a compound annual growth rate of 27.3% in assets and attracted inflows of $816 billion over the past ten years as the number of products available expanded almost 11 times. In the last three years, ETFs have accounted for 29.0% of all U.S. equity volumes.

Max Chen contributed to this article.

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.