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Top 15 Institutional ETF Holders

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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.

“Investment advisors have been steadily increasing their usage of ETFs, registering the largest growth rate of ETF assets in the last 15 years,” Mercado writes in the report. “Private banking/wealth management institutions have also been steadily increasing their usage of ETFs, and have recently become the second largest group among institutional holders. Brokers, however, have begun to represent a lower proportion of institutional ETF assets since the financial crisis.”

Other institutions such as mutual fund, hedge fund and pension fund managers have also been increasing their ETF use.

As Mercado says in the report, these trends show that ETFs are being used for investment purposes more and more – and that ETFs are not a retail phenomenon anymore.

The report finds that many investment advisors and private banking/wealth management institutions use ETFs as building blocks to implement their investment solutions. However, according to the report, brokers use ETFs for non-investment purposes such as inventory for market making, create to lend activities, and seeding of new ETFs. Deutsche’s research shows that ETF volume and cash flow activity is clearly dominated by institutional investors.

“Despite the decreasing market share of some institutional investors (e.g. brokers), ETF institutional assets in dollars have grown at every institutional investor category,” Mercado writes. “Moreover the number of ETFs used by institutions has also increased consistently over the years. Therefore for those that still question whether there is room for new products, the simple answer is: apparently yes.”

Most of the largest asset managers around the world are already using ETFs, but who holds the most ETF assets? Deutsche listed the top institutional ETF holders, and here are the top 15:

Top 15 Institutional ETF Holders

  1. Morgan Stanley Smith Barney LLC — $45.3 million in ETF assets
  2. Merrill Lynch, Pierce, Fenner & Smith Inc. — $42.4 million
  3. Goldman Sachs & Co. (Private Banking) — $40.0 million
  4. Wells Fargo Advisors LLC — $35.1 million
  5. Bank of America, NA (Private Banking) — $29.7 million
  6. JPMorgan Chase Bank, NA (Investment Management) — $29.3 million
  7. UBS Financial Services, Inc. — $26.03 million
  8. Wells Fargo Bank, NA (Private Banking) — $25.1 million
  9. Morgan Stanley & Co. LLC — $19.6 million
  10. Citigroup Global Markets, Inc. (Broker) — $17.2 million
  11. Managed Account Advisors LLC — $16.4 million
  12. BlackRock Advisors LLC — $16.1 million
  13. JPMorgan Securities LLC Broker — $15.8 million
  14. Northern Trust Investments, Inc. — $15.5 million
  15. PNC Bank, NA (Investment Management) — $15.4 million

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