Bringing you live news and features since 2006 

Institutional users of ETFs continues to grow


The number of institutions holding exchange-traded funds has grown by 12 per cent in 2008, according to a report by Barclays Global Investors.

In the four quarters of 2008, a total of 2,926 institutional investors worldwide have reported using one or more ETFs. Over the past 11 years, the number of institutional users has increased 1,673 per cent. This represents a CAGR of 29.9 per cent.

Institutional investors in 42 countries have reported using at least one ETF in 2008. The US, the UK, Canada, Spain and Switzerland have the largest number of institutional users and account for 83 per cent.

Investment advisers are the largest category of users accounting for 74 per cent of institutional users. The CAGR for this category over the past 11 years is 31.1 per cent.

Use by hedge funds has increased and currently hedge funds are the second largest category representing 15 per cent. Over the past 11 years the CAGR of hedge funds has been 42.4 per cent.

The SPDR S&P 500, iShares MSCI EAFE, iShares MSCI Emerging Markets and iShares Russell 2000 are the most widely held ETFs.
Deborah Fuhr, global head of ETF research and implementation strategy at BGI, says: “During the market turmoil of 2008 investors became even more concerned about counterparty risk, transparency, liquidity and the use of derivatives and structured products. As a result, the use of ETFs to implement exposure to cash, fixed income, commodities and equity indices became more popular.”

Market volatility increased significantly since Lehman Brother’s bankruptcy on 15 September 2008. During 2008, the S&P 500 Index moved by more than five per cent on 18 days. There were only 17 days with moves greater than five per cent in the previous 53 years, according to S&P. Equity volatility as measured by the VIX index soared to record levels – nearly double the prior spikes in 2002 and 1998. The VIX started the year at 23 and ended the year at 40 with a spike of 80 and a low of 15.8.

In addition, over the five year market cycle from 2004 to 2008, S&P 500 outperformed 71.9 per cent of actively managed large cap funds, S&P MidCap 400 outperformed 79.1 per cent of mid cap funds and S&P SmallCap 600 outperformed 85.5 per cent of small cap funds. These results are similar to that of the previous five year cycle from 1999 to 2003. The script was similar for non-US equity funds, with indices outperforming a majority of actively managed non-US equity funds over the past five years.

On a global basis ETF net sales were positive USD270.4bn while net sales of mutual funds (excluding ETFs) were minus USD117.1bn during 2008, according to Strategic Insight.

Over half of the largest institutional investors (those with assets over USD10bn) report using one or more ETFs, while less than a quarter of institutions with assets under USD250m report using ETFs. The overall penetration rate is still very low at 6.7 per cent of reporting institutions.

The reported ETF holdings of USD274,167m at the end of December 2008 account for only 38.6 per cent of the total ETF AUM of USD710,902m at the end of 2008.

Latest News

Morningstar has published a review of the European ETF market for the first quarter 2024, which finds that it gathered..
ETF data consultant ETFGI reports that assets invested in the global ETF industry reached a new record of USD12.71 trillion..
Calastone has published an ETF white paper which examines several of the processes that take place across the lifecycle of..
Adapting product lines to fit into changing methodologies and meet shifting demand is essential to remaining relevant in the industry..

Related Articles

US ETF issuers of active ETFs are facing an increase in fees from the big custodian firms, such as Charles...
Taylor Krystkowiak, Themes ETFs
Themes ETFs opened its doors in December 2023, with an introductory suite of 11 ETFs – seven thematic and four...
Konrad Sippel, Solactive
At the end of March, financial index specialist, Solactive, published its 2024 annual report on future trends.  ...
Lorraine Sereyjol-Garros, BNP Paribas
Following changes to the French Monetary and Financial Code and of the French market authority AMF’s General Regulation, it is...
Subscribe to the ETF Express newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by