Everybody uses exchange traded funds: the average retail investor, the advisor and institutional investors. And even mutual funds?

Mutual funds may use ETFs in their own portfolios, but they remain tight lipped on the subject since most don’t hold the funds long enough to announce it at month or quarter-end, Ari Weinberg for Forbes points out.

According to a ITG survey, only 15% of clients did not trade ETFs. For about 24% of ITG clients, ETFs made up 1% of trades and 37% traded ETFs 2% to 5% of the time. In the fourth quarter of 2011, ETFs made up 5% of all dollar-weighted equity trade in ITG client portfolios, up from 4% last year.

An ITG report reveals that institutional investors would benefit from increased use of ETFs in trading and investing as the tight spreads and low volatility of ETFs help lower costs. The same attributes would also help mutual funds cut costs and diminish active management expense ratios. [ETFs vs. Index Funds]

The ETFs most commonly held tend to be the largest and most liquid – funds that can be easily converted with cash. Consequently, mutual funds that get new cash infusions would buy and hold ETFs before moving into individual stocks.

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