The versatility of an ETF constructed based around specific exposures (countries, sectors, themes, factors) makes it well suited for various institutional strategies when constructing an investment portfolio.
Institutions often use ETFs primarily to access global markets to complement in-house capabilities, aiming to enhance returns or adjust risk for broad diversification. In addition, institutions also use ETFs when there are changes in the underlying external fund managers’ allocations to adjust the strategic exposure of their holding back to the desired level.
Institutions often use ETFs primarily to access global markets to complement in-house capabilities, aiming to enhance returns or adjust risk for broad diversification. In addition, institutions also use ETFs when there are changes in the underlying external fund managers’ allocations to adjust the strategic exposure of their holding back to the desired level.
Asset Liability Management (ALM)
ETFs offer insurers a means to cut costs, enhance flexibility, and effectively manage portfolios to meet operational cash needs. As a versatile tool, ETFs facilitate strategic and tactical asset allocation, enabling easy rebalancing, filling gaps, and addressing underweight positions. These attributes make ETF not only a valuable product offering but also as assets on insurers’ balance sheets.
Investment-Linked Fund (ILF)
Investment-linked funds featuring ETFs are used to capture the broad market's performance and factor exposures, meeting the essential ILF characteristics for diversified investment strategies.
Portfolio Construction
ETFs for portfolio construction can help to provide expanded reach to specific geographic areas, improve portfolio styling, and aid in building a customized investment portfolio that best suits fund managers’ needs.
Feeder Fund
Existing ETFs with historical track records allow for fund houses a cost efficient, expedient issuance and appeal as a target fund to feed into.
ETFs’ simplicity suits individuals of all profiles
Commonly used for instant diversification, optimizing portfolios without extensive research on companies.
ETFs enable access to challenging markets and complex investment strategies such as high-dividend investments typically adopted by institutional investors.
Long-term investors build robust retirement portfolios to navigate market fluctuations, while short-term investors utilize ETF’s intraday trading for immediate needs.