The number of institutional investors using ETFs has grown from less than 400 in 2000 to more than 3,000 institutions at the end of 2014.
Deutsche Bank released ETF research in a report in early June called “A Stock Picker’s Guide to ETFs” that examines how ETFs have become an institutional vehicle.
“The growth in institutional usage has not only been due to an increase in dollar investments, or additional products, but also due to an increase in new institutional ETF users,” writes the report’s author Sebastian Mercado.
According to Deutsche’s research, the share of ETFs owned by institutions was 58% at the end of 2014, and has been above 50% since 2011. Meanwhile, retail investors owned 42% of ETFs as of Q4 2014.
“For a long time ETFs have been considered a retail product, however we believe that such affirmation is currently a misstatement,” writes Mercado. “Although adopted earlier by retail investors, ETFs have become an institutional vehicle and we have the data to support this statement. We believe that a more accurate statement would be: ‘ETFs are institutional products also used by retail investors.’“
Of the institutional investors using ETFs, Deutsche looks at which ones are the major holders of ETF institutional assets.
Investment advisor, private banking/wealth management and broker institutions are the top holders of ETF institutional assets with 28.3%, 11.8%, and 11.4%, respectively.