ETF Use at Core of Portfolios
Institutional investors have also taken note of the utility of ETFs in other tasks and additionally use the products to make tactical adjustments to their portfolios, implement core/satellite portfolio structures, equitize cash, and rebalance. Specific to Canadian insurance companies, more than two-thirds (62 per cent) use ETFs to gain passive exposures in the "core" portion of their core/satellite portfolios with exposures being either short-term and tactical in nature, or longer-term and strategic.
ETFs Move Beyond Equities
The study also found some interesting trends in terms of asset allocations - more than 70 per cent employ ETFs in equities, with institutional funds using equity ETFs most widely for Canadian and U.S. equity exposures and 83 per cent of asset managers using equity ETFs for international market exposure, putting it ahead of domestic and U.S. equities.
In terms of fixed income, 50 per cent of institutional funds and 45 per cent of asset managers use ETFs in domestic fixed income and 28 per cent use ETFs for international fixed-income exposure. Furthermore, ETF usage is also becoming relatively common in other asset classes, with approximately one-third of institutional funds and asset managers using ETFs in REITS and another third of institutions using ETFs for commodities.
Between April and May 2013, Greenwich Associates conducted online and telephone interviews in Canada with 18 institutional funds (corporate pension funds, including corporate pensions of U.S. corporation subsidiaries; public/provincial pension funds; endowments; and foundations) and 29 asset managers that identified themselves as ETF users. The study was designed to track and uncover ETF usage trends.
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