Institutional Investors Continue To Warm To ETFs

Hedge funds, active traders and even retailer investors have long been fans of exchange traded products, but the institutional crowd is certainly taking a shine to ETFs and ETNs as well as a new study by Greenwich Associates points out. Institutional investors already account for about half of the assets invested in ETFs, but 48% of asset-management firms interviewed and 33% of institutional funds interviewed indicated they expect to increase their allocations to ETFs by 2013, the Wall Street Journal reports. ETFs have become popular with some college endowment funds and as Benzinga has highlighted, Harvard's endowment has held stakes in emerging markets funds such as the iShares MSCI Brazil Index Fund EWZ and the iShares MSCI South Korea Index Fund EWY, among others. Among the firms surveyed by Greenwich Associates, about half of the institutional funds and asset management firms expect to increase their ETF allocations by 5%. No asset management firm and less than 10% of institutional funds plan to reduce their ETF exposure, the Journal reported. More importantly, there is significant room for growth for exchange traded products in this universe as 60% of institutional funds and 20% of asset managers interviewed indicated they have $100 million or less invested in ETFs, according to the Journal. In terms of holding periods, a quarter of institutional funds hold ETFs for one to six months, another quarter hold ETFs for seven months to a year and a third hold ETFs longer than a year. While the exact number of ETFs assets held by pensions, endowments, etc. is hard to pin down, it is clear this is a growing market for ETFs. Raytheon's corporate pension plan had $2.4 billion in ETFs last year while Notre Dame's endowment had $37 million invested in ETFs, the Financial Times reported.