An Alternative Source of Liquidity
One of the key characteristics of ETFs is the liquidity of the ETF itself, partly due to the liquidity of the ETF shares and partly due to the liquidity of the underlying investments. This feature has been attracting a growing number of investors.
For nearly a decade now, concerns about liquidity in the markets have prompted institutional investors around the world to seek out alternative liquidity sources. For many, ETFs have filled that role.
Between October and December 2018, a new US ETFs survey from Greenwich Associates canvassed 181 institutional investors, including 37 institutional funds, 33 insurance companies/insurance company asset managers, 56 registered investment advisors and 11 investment consultants. The study highlights that 83% of the investors and 90% of the asset managers cite liquidity as a primary reason for investing in bond ETFs.3
Within equities, the study also noted that while institutions cite they are investing in equity ETFs first and foremost for their ease of use within portfolios, 81% also stated liquidity as a primary reason for using the funds.