Evidence continues to mount that institutional investors are increasingly embracing exchange traded funds and are doing so for a variety of reasons.
When comparing 2013 survey data to previous years, 88% of survey respondents reported using ETFs in 2013, compared to 70% in 2010, according to fresh data from BlackRock’s (NYSE: BLK) iShares unit, the world’s largest ETF issuer.
BlackRock surveyed over 1,400 institutional clients, including pensions, foundations and endowments; asset managers, consultants, insurers, and registered investment advisors, finding that institutional investors are now using ETFs for myriad reasons. [ETF use on the Rise Among Institutions]
Those reasons include use of ETFs as core portfolio solutions as well as more tactical approaches. Additionally, ETFs have gained traction with institutions as risk management and rebalancing tools.
“As more and more institutions become more familiar and comfortable with ETFs, their usage typically evolves from tactical to core allocations and then expands to more uses such as risk management and portfolio rebalancing,” said Daniel Gamba, Head of iShares Americas Institutional Business at BlackRock, said in a statement. “We believe the momentum of ETFs usage will continue as institutional investors take full advantage of the product’s flexibility.”
Earlier this year, Greenwich Associates said 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 Push for Increased Institutional Usage]
Dispelling the notion that large investors are overly concerned about perceived liquidity issues with ETFs, the data suggest liquidity is one of the primary reasons institutions have rapidly warmed to ETFs.