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Banking

Banks race to integrate ETFs into broader liquidity strategies

Investors are using exchange-traded funds (ETFs) as tactical tools and strategic, longer-term allocations, so banks are investing heavily to capture this business.

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Research recently published by Greenwich Associates revealed that allocations to ETFs in Europe increased by 50% in 2018 and now total 15% of total assets among 127 institutional ETF investors surveyed by the research firm.

These included 46 institutional funds, 48 asset managers, 14 insurance companies and 19 discretionary wealth managers.

Andrew McCollum, managing director at Greenwich Associates, attributes some of this growth to the market volatility at the end of last year.

“Our data suggests that last year’s robust growth in ETF investments by European institutions occurred not in spite of the turbulent conditions but because of them,” he says.

“As institutions repositioned their portfolios to address heightened volatility and risk, they made wide use of ETFs to implement specific modifications. Institutions are utilizing ETFs as both tactical tools and as a strategic, longer-term staple in the portfolio.”

As bond and equity ETFs become more of a portfolio management tool, banks are racing to integrate them into their broader liquidity strategies.

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Jay Mann, Citi

“There has been significant growth in passive investment and it would be imprudent to ignore that ETFs are growing the way that they are,” says Jay Mann, head of global fixed income and currencies beta trading at Citi.




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