The increased ETF adoption among insurance companies reveals that instead of outsourcing with active managers, the firms are utilizing factor investment strategies in their own portfolios.

Looking ahead, according to a recent Greenwich Associates Study, Institutional Investment in ETFs: Versatility Fuels Growth, U.S. institutional investors plan to increase their use of ETFs in 2016. [ETFs Finding More Fans Among Institutional Investors]

While institutional investors have been picking up ETFs, Gamba believes it is still the early stages of institutional ETF usage.

“There’s just 1% in asset management assets being devoted to ETFs and we think that percentage will increase,” Gamba said. “For example, over 40% of those multi-asset portfolios interviewed by Greenwich are using ETFs, using them to replace derivatives, futures or as a tool to add alpha to their portfolio. We will see more of it.”

Consequently, as institutions step into ETFs, all investors will enjoy increased volume and tighter spreads.

Max Chen contributed to this article.