“The reason is to maintain liquidity, so obviously one thing that is very important to us is to invest in the most liquid ETFs in their space,” Gus Sauter, Vanguard’s CIO, said in the report. “In that particular segment of the market, the SPDR is the most liquid. Even though we have a competing ETF, it’s not as liquid, so we are just trying to provide the best value for our clients.”
“A good rule of thumb is: The broader the potential instrument and asset classes a manager is allowed to use in a portfolio, the more likely they are to make use of ETFs,” consultant David Bauer, a founding partner with Casey Quirk & Associates LLC, said.
Additionally, ETFs are providing money managers the ability to gain market exposure to hard-to-reach areas.
ETFs are used “to provide efficient exposure to an asset class for small positions where there isn’t a mutual fund alternative, or where necessary to shift the portfolio’s asset mix quickly while keeping trading costs lows,” Brent Smith, CIO of Franklin Templeton’s multi-asset strategies, said in the article. [What is an ETF?]
For more information on ETFs, visit our ETF 101 category.
Max Chen contributed to this article.