Greenwich Associates Releases Debut Asian ETF Study

When it comes to their increasing investments in exchange-traded funds (ETFs), Asian institutions are demonstrating a high degree of sophistication.

That’s a key conclusion of Greenwich Associates debut Asian Exchange-Traded Funds Study, the results of which were released today in ETFs Take Root in Asian Institutional Portfolios. Greenwich Associates interviewed 52 Asian institutional investors about their ETF investments and perceptions. Study participants included pension funds, asset managers, insurance companies, endowments and foundations.

Ninety-four percent of ETF users in the study employ ETFs in equity portfolios, and one-third use ETFs in fixed income. Nearly 45% of institutional equity ETF users participating in the study expect to increase  allocations in the coming year, and more than half of these institutions plan to boost allocations by 10% or more. Over the longer term, Greenwich Associates expects ETF usage to expand in fixed income and other asset classes.

The results reveal several trends that demonstrate the sophisticated approaches taken by Asian institutions with regard to ETFs and point to continued growth in ETF use and investment:

  1. ETFs as an alternative to futures. Half the ETF users in the study plan to replace an equity futures position with an ETF in 2016, and about 1 in 5 expect to replace a fixed-income futures position.
  2. Smart-beta ETFs take traction. Approximately one-quarter of the institutional ETF users in the study have started using non-market-cap-weighted/smart-beta ETFs. Nearly 30% of institutions that have started investing in these funds plan to increase smart-beta allocations in the year ahead, while over 60% of current users expect to invest in minimum volatility ETFs and over a quarter into single-factor and multi-factor ETFs.
  3. Increased use of ETFs in multi-asset strategies. The growing popularity of multi-asset investment strategies among investors globally is increasing ETF use among the asset managers offering these products. Nearly two-thirds of the Asian asset managers in the study use ETFs in multi-asset funds.

“ETFs have established themselves as important components of Asian institutional investment portfolios, and the results of Greenwich Associates debut Asian Exchange-Traded Funds Study show the potential for further growth,” says Andrew McCollum, Greenwich Associates Managing Director and author of the study.