Big investing firms kept pouring money into ETFs in 2018, and a survey of their leaders found three major reasons the trend should continue.
So the institutions were attracted to the ease and speed of trading ETFs. The funds were attractive for risk management purposes because they're liquid, low-cost, and transparent compared to other types of investments.Institutions also found ETFs to be a good way to get exposure to different stock and bond indexes. They were especially willing to use ETFs to replace active and index mutual funds, but many also switched toward ETFs and away from individual bonds and stocks.
Greenwich Associates Managing Director Andrew McCollum says the institutions may have been disappointed in returns from active managers during the market turmoil of late 2018. That's when active management is supposed to be most valuable, but if they weren't satisfied with their returns,Big institutions are finding they can use ETFs for a wide variety of purposes including changing tactics, rebalancing their portfolios and choosing new core assets.
This chart illustrates the huge variety of reasons the institutional investors gave for buying ETFs and how they've changed in the last year.Greenwich Associates surveyed 181 investment managers, institutional funds, insurance companies, investment advisers and others. Most had at least $5 billion in assets under management.
Greenwich said the shift into ETFs might slow down somewhat, but very few of the surveyed funds said they plan to reduce their exposure to ETFs in 2019. And of the funds that aren't currently investing in ETFs, most said they weren't doing so because they're currently prohibited from buying them — something that could change, unleashing even more pent-up demand.simply click here to claim your deal and get access to all exclusive Business Insider PRIME content.
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