Institutional investors have continued to use exchange traded funds in a variety of ways, and inflows from large institutions are projected to grow this year. Broad-based domestic and international equity ETFs are expected to gain these assets, along with more exotic strategies that have come to market that will help with investing challenges.

“Institutions are continuing to embrace ETFs because these products allow investors to solve problems – whether that means gaining exposure to certain asset classes or accessing liquidity,” commented Daniel Gamba, Head of iShares Americas Institutional Business at BlackRock. “While some may consider ETFs passive investment vehicles, the Greenwich survey results demonstrate that institutions are using ETFs actively to achieve better strategic and tactical investment outcomes.” [iShares: three Lessons from the Reinhoff-Rogoff Affair]

In the United States, 18% of institutional funds currently use ETFs in their portfolios, up from 14% in 2012. The largest and most influential institutions use ETFs the most, according to a recent note from a Greenwich Associates Survey. For example, 47% of U.S. endowments use ETFs, as do nearly a quarter of corporate and public pension funds with more than $5 billion in assets under management. [ETF Sponsors Can Provide Backtested Data to Institutional Investors]

Furthermore, 9 out of 10 institutions that use ETFs within their strategies plan to use these tools more in the coming year. The asset level of investment will at least stay the same, or grow, depending on the strategy. About 13% of the current user plan to increase their use of ETFs by 10% or more, according to the study.

Most institutions that plan to use ETFs more are going to use them for strategic, tactical allocation, a step closer to active management. More strategic ETF usage will be implemented using the fixed income market. There are plenty of insurance companies, registered independent advisors and institutions that will use fixed-income ETFs for problem-solving investment strategies. About half of the institutions surveyed currently use ETFs within a tactical strategy. Asset managers, RIAs and investment consultants use ETFs and advise their clients to invest in them for strategic use.

“These results clearly demonstrate that the role of ETFs within institutional portfolios is changing,” says Greenwich Associates consultant Andrew McCollum. “Although ETFs first entered institutional portfolios mainly as tactical tools and continue to be used in important tactical functions, many institutions indicate they now regularly use ETFs as tools for gaining long-term exposures and implementing investment strategies.” [ETF Managed Portfolios See Steady Growth]

Tisha Guerrero 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.