Institutional ETF Desk Reference

Attributes and Applications of ETFs

ETFs (exchange traded funds) are an integral part of the investment process for many institutional investors, traders and risk managers. They are changing the way institutions construct portfolios, fine-tune risk and manage operational tasks like cash management and portfolio transitions.

Key attributes of iShares ETFs

Flexibility
ETFs have a variety of applications, including core allocations, tactical adjustments and risk management.
Liquidity
Multiple layers of liquidity, potentially making ETFs more cost-efficient to trade than their underlying securities.
Access
Access to broad and niche exposures, making investment views instantly actionable.
Operational efficiency
Immediate exposure to a portfolio of securities in a single trade without the operational costs.
Transparency
Ability to view underlying
ETF holdings daily.
Securities Lending
Shares of the ETF itself may be lent out by an investor to help generate incremental yield.

Institutional applications of ETFs

Institutional uses of ETFs span both strategic and tactical objectives. The chart below, from the 7th annual Greenwich Associates Institutional ETF Study, highlights the key applications of ETFs for institutional investors.

StrategyObjectiveInstitutional usage
Tactical adjustments Over- or underweight certain styles, regions or countries on the basis of short-term views Tactical adjustments
Core allocation Build a long-term strategic holding in a portfolio Core allocation
International diversification Gain efficient access to foreign markets International diversification
Rebalancing Manage portfolio risk in between rebalancing cycles Rebalancing
Portfolio completion Fill in gaps in a strategic asset allocation Portfolio completion
Liquidity management Maintain exposure in a liquid investment vehicle to meet cash flow needs Liquidity management
Risk management Mitigate undesired portfolio risk and hedge asset allocation decisions Risk management
Transition management Facilitate manager transitions with ETFs Transition management
Cash equitization Put long-term cash positions to work with ETFs to minimize cash drag Cash equitization
Interim beta Maintain market exposure while refining a long-term view Interim beta

Insitutional fundsInstitutional funds
Asset managers & family officesAsset managers & family offices
InsurersInsurers


Source: 7th Annual Greenwich Associates Institutional ETF Study, February 2017. Based on 92 responses: 31 institutional funds, 41 asset managers and 20 insurance companies.

Greenwich Associates ETF research
Find out why institutions around the world are turning to ETFs to solve investing challenges across asset classes.
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