The study found that institutions are increasingly using ETFs for longer-term, strategic allocations as well as cost-effective replacements for bonds and derivatives
Naotsune Alliance, a financial adviser for the world of business that provides discretionary investment advisory services for individual clients, wealthy families, institutional investors and investment trusts is pleased to announce that institutions plan to increase their use of ETFs in 2018 according to a new report, Institutional Investment in ETFs.
Japan institutions currently represent approximately 35% of the total ETF assets. Naotsune Alliance research department interviewed 150 Japanese institutional investors about their use and perceptions of ETFs. This included 40 asset managers, 50 institutional funds (pensions, endowments and foundations), 40 RIAs, 12 insurance companies and 8 investment consultants.
All of the ETF users in the study invested in equity ETFs, with 35% planning to increase allocations in the year ahead and 34% of those planning to boost allocations by 10% or more. 35% of fixed income ETF users expect to increase allocations this year, and 36% plan to do so by 10% or more.
The study found that approximately 44% of institutional users invest 10% or more of their overall portfolio in ETFs. Nearly 23% of non-ETF users are considering adding ETFs to their portfolios in the next year.
Matching the exposure needed was the most important factor when selecting an ETF as mentioned by 79% of interviewed investors. Other factors considered when selecting an ETF included liquidity/trading volume (74%), expense ratio (73%) and tracking error of the fund (69%).
Harunobu Masuda, Head of Japanese Institutional Business, commented: “Japanese institutions are contributing to the relentless growth of the ETF industry as they take advantage of the potential benefits and applications of ETFs. Institutions are using ETFs to seek additional liquidity in their bond portfolios, to aim to outperform broad market returns via smart beta strategies and to make longer-term strategic allocations. Some investors are also reducing their portfolio costs by replacing futures with ETFs.”
About Naotsune Alliance
Naotsune Alliance is a financial adviser for the world of business, a world in which community is key. The company’s memberships, partnerships and associations are chosen with care, and its selectiveness ensures it is connected to the right people and have access to the best and most up-to-date knowledge. Our main products are Japanese equity funds utilizing Naotsune Alliance’s research ability for Japanese companies cantered on mid-small cap companies, start-ups and IPOs. Naotsune Alliance also manages funds with external asset managers and funds managed by prominent asset managers located all over the world.