March 12, 2013 (PLANSPONSOR.com) – Institutional market
influence was most prominent within the equity exchange-traded fund (ETF) space in 2012, according to Strategic Insight.
The institutional market segment held almost one-half (49%)
of total equity ETF assets, according to Strategic Insight's report, “ETF
Trends by Channel and Investor Type – 2012.” Institutional presence was
heaviest within international equity ETFs, accounting for 57% of total assets.
“What’s really driving the
heavy international equity use is the emerging markets piece,” Dennis Bowden, assistant director of U.S. research
at Strategic Insight, told PLANSPONSOR,
adding that ETFs allow for quick exposure to liquidity in emerging markets.
Strategic Insight’s breakdown of ETF assets by fund types
revealed that institutional investors allocated 28% of their total ETF assets
to international equity strategies, while retail investors held 17% of their
total ETF assets within international equity as of the end of 2012.
Institutional and retail investors held about the same percent of assets in U.S.
equity (37% and 35%, respectively).
Bowden said that, at times, individual investors’ use of ETFs in U.S. equity strategies is assumed to mirror
overall industry ETF trends, but institutional investors are using U.S. equity
ETFs more prevalently. Institutional investors accounted for a large majority
of aggregate U.S. equity ETF demand in 2012—depositing a net $33 billion into
such strategies during the year and far exceeding demand for U.S. equity ETFs
within the retail space, the report said. “They’re using [ETFs] for different
purposes,” Bowden added.
Some demand for U.S.
equity ETFs by institutional investors may have been spurred by opportunities
in the bull markets, but the flow totals were also influenced by the tactical
use of such ETFs for hedging and other trading strategies, as well as liquidity
management by mutual funds, hedge funds and other investment pools, the report
Overall, it is estimated that 58% of ETF assets were held within the
retail marketplace at the end of 2012, compared with 42% held by institutional
For information about how to purchase Strategic Insight’s report, email
John Hale at email@example.com.