Institutional investor allocation to exchange-traded funds (ETFs) shot up by 50% last year, a study by consultants, Greenwich Associates has found.
ETFs now account for 15% of the assets of the institutional investors who took part in the survey.
Last year saw $315.8 billion (€278.4 billion) of global inflows into ETFs – the second-highest figure ever recorded after 2017 ($467.1 billion), according to the report.
Explaining the growth behind the security, the report noted: “As institutions repositioned their portfolios to address heightened volatility and risk, they made wide use of ETFs to implement specific moderations.
“Institutions are utilising ETFs as both tactical tools and as a strategic, longer-term staple in the portfolio.”
It added that in fixed income, ETF allocations doubled to 20% of total assets among institutional ETF investors, as did allocations to equity ETFs, which increased to approximately 28% of assets from 14% in 2017.
Greenwich Associates predicts institutional investment in ETFs to continue in 2019 with 40% of respondents who invest in the security saying they are looking to increase their ETF allocations over the next year.
“In a year that saw the return of broad market volatility, investors turned to ETFs to capture alpha, manage risk, invest sustainably, and tap liquidity in tighter financial conditions,” says Brett Pybus, head of iShares Emea investment and the product strategy team at BlackRock, which sponsored the research.
“Looking forward, a revolution in the way portfolios are built in Europe will feed the momentum in ETF adoption we’ve seen in recent years. Investor sensitivity to cost, transformative regulation, the modernisation of the fixed-income ecosystem and greater access to data and analysis tools are all setting the stage for future growth,” added Pybus.
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