Study: Pension Funds Flock to ETFs for Diversification

A recent survey of European institutional investors, including almost 70 pension funds, attempted to pin down why institutional investors are driven towards ETFs.

The research, conducted by Greenwich Associates, concluded that most investors are drawn toward ETFs because of the diversification they promise.

More on the results from Investments & Pensions Europe:

Pension fund allocations to exchange-traded fund (ETFs) are driven by diversification and tactics over short-term transition management, research shows.

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The study, sponsored by BlackRock, also found 69% of pension fund investors used ETFs for international diversification.

More than half (53%) used the funds for tactical adjustment in portfolios, as well as part of a core allocation.

Only 9% used ETFs for transitional management, with roughly one in 10 using the strategy for interim beta or overlay management.

The report said: “Despite the widespread use of ETFs for tactical applications, few institutions are employing ETFs as true short-term investments.

“Less than 2% of study participants report average holding periods of a month or shorter. In practice, European pension funds seem to be employing ETFs in the most strategic manner.”

The full report can be accessed here.

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