While institutional investors have been slow in adopting ETFs, there may be significant room for further growth in institutional ETF usage now that they have gotten a taste.

Institutional investors have a positive view of ETFs and primarily utilize ETFs as trading tools and for their low-cost structure. An large amount of institutional traders look to ETFs for risk management, and a majority also incorporate ETFs into a diversified portfolio because of their low-cost structure.

“58% of U.S.-listed ETF assets were held by institutions,” Fuhr added, explaining that the Securities and Exchange Commission identifies an institution as any entity that manages over a hundred million dollars in assets. “You might say, ‘well that doesn’t make sense,’ but for me it does because the way they make decisions is much more thorough and systematic when you’re large.”

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