“ETFs provide a liquid vehicle to express a more timely view of a particular sector of the market or an opportunity that’s available or to decrease risk temporarily in the portfolios,” one study participant told Greenwich Associates. “It’s just a great vehicle for that.”

The Managing Director of Financial Risk Management for a U.S. asset management firm added, “The transition from high risk to low risk in a nimble way is very important, and ETFs are great for that.”

Investors Look to ETFs Like Never Before

Consequently, more are looking into ETFs alongside individual stocks and bonds and derivatives for use in a wide variety of active and passive investment strategies.

Further supporting the greater usage of ETFs among institutions, many institutions have altered their investment guidelines to remove provisions restricting exposure to ETFs. These changes are being made because institutions believe ETFs can help enhance portfolio liquidity and reduce costs.

“We are a top-down manager, so we like to choose an asset class and go down from there,” the Head of Trading for a U.S. asset manager told Greenwich Associates. “The nice thing about ETFs is that it doesn’t cause us to be an equity stock picker. It allows us to be simply an asset class picker.”

For more information on the ETF industry, visit our ETF performance reports category.