More portfolio managers and particularly asset-allocation funds are using ETFs to get exposure to various markets with low fees, transparency and the ability to quickly trade.

“In fact, the past five years have seen the launch of about 100 funds that hold at least 80% of their assets in ETFs,” Barron’s reports. “And it’s becoming more and more common for managers of conventional mutual funds to use ETFs here and there for ‘tactical’ purposes.”

However, Barron’s points out that mutual funds of ETFs are more expensive than their traditional counterparts: funds of mutual funds. It’s a troubling anomaly since ETFs are generally cheaper than mutual funds. [ETFs Increasingly Popular with Fund Managers]

Also, stock-picking skippers of mutual funds are increasingly turning to ETFs to quickly establish positions in entire markets rather than researching individual companies. These managers value the liquidity of ETFs, according to the report.

Hedge funds are also big users of ETFs and were among the earliest adopters of the financial products. [More Hedge Funds Tap ETFs]

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