“Institutions are often first drawn to ETFs for help with two basic functions: manager transitions and cash equitization/interim beta,” according to the study.
“When someone has an underperforming manager they’d like to replace, in the interim, they don’t want to leave the money with the manager, and they don’t want to lose access to that asset class; and ETFs allow them to maintain their allocations,” McCollum added.
For asset managers, 61% use ETFs during manager transitions and 78% for cash equitization/interim beta – with institutions, the percentages were 55% and 44%, respectively.
For more information on ETFs, visit our ETF 101 category.
Max Chen contributed to this article.