ETFs within Institutional Managed Portfolios:
A Review of the Latest Uses and Trends

Abstract

As beta strategies play an increasingly important role in the design and implementation of investment portfolios, Exchange-traded funds (ETFs) continue to gain traction within institutional fund management. This growth has been driven in recent years by an increased focus on cost, risk management, and the benefits of diversification. A series of recent surveys by Greenwich Associates reported that ETFs are now used by 18% of institutional funds, up from 14% in 2012. Greenwich also found that this usage was “significantly higher” among the largest and most innovative investors. For example, almost a quarter of corporate and public pension funds with more than $5 billion in assets under management used ETFs. Looking forward, the growth in institutional ETF investing is expected to continue with 50% of the surveyed U.S. institutions indicating they expect to increase allocations to ETFs this year. In this article, the authors review the latest trends in both tactical and strategic applications of ETFs in institutional managed portfolios.

TOPICS: Exchange-traded funds and applications, portfolio construction, passive strategies