ETFs as Financial Instruments

52% of institutions have replaced a derivative product with an ETF 1

A subset of ETFs has evolved to serve many functions for institutional investors. These utility players—known as Financial Instruments—are typically large and liquid and are often used interchangeably with derivatives.

Compare ETFs, Swaps, and Futures with four lenses

ETFs and swaps can provide precise exposure to a wide variety of indexes, while futures’ open interest tends to be concentrated in a handful of local indexes.
Comparing historical performance can be a useful way to identify the relative efficiency of instruments over different time periods and economic regimes.
While investors use ETFs, swaps, and futures to achieve similar investment objectives, their carry cost structures differ meaningfully.
Liquidity is often the most visible, best understood, and therefore, most frequently used lens through which to compare index products.
Delta One Tool
BlackRock’s Delta One tool presents these four lenses to compare index products, as well as the necessary customization to ensure optimal implementation for a range of investment objectives.
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ETF Options

In the past 10 years, listed ETF options volume has grown to nearly 39% of overall U.S. listed equity options volume.2 Listed ETF options can be a useful tool for institutional investors for a variety of portfolio strategies.

U.S. listed options trading volume: 12% index options, 39% ETF options, 49% single stock options

ETFs and securities lending

The popularity of ETFs as hedging vehicles has created an active ETF lending market with lendable value over $200B.3 This demand, often from hedge funds and other tactical active managers, allows institutions such as pension plans, insurance companies, and asset managers to unlock incremental yield by holding a long ETF position and participating in a securities lending program.

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iShares Russell 2000 ETF (IWM) has historically garnered persistent demand in the lending market.
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In partnership with FTSE Russell