Invesco tops list of institutional assets in sponsored ETFs

Invesco Ltd., the fourth-largest exchange-traded fund manager by assets, said institutions had $52.4 billion invested in its ETFs at the end of last year, landing it the top spot in Pensions & Investments' first ranking of ETF managers based on institutional assets.

Charles Schwab Investment Management Inc., which does business as Schwab Asset Management, came in a distant second at $11.7 billion, according to P&I data for managers of institutional assets in sponsored exchange-traded funds/notes by total worldwide assets.

Invesco's $52.4 billion of institutional client investment in its ETFs accounted for nearly 77% of the $68.1 billion in total assets reported by the 14 managers that responded to P&I's question regarding institutional clients, which was part of P&I's latest annual survey of the largest money managers.The three biggest ETF managers — BlackRock Inc., Vanguard Group and State Street Global Advisors — did not specifically disclose institutional assets.

"We expect growth and greater institutional interest in Invesco ETFs to continue," Emily Foote McKinley, New York-based head of institutional specialists for ETFs and indexed strategies at Invesco, said in written comments.

As for how Invesco's clients are using its ETFs, Ms. McKinley said Invesco is seeing institutions embrace both single-factor ETFs such as the Invesco S&P 500 Low Volatility ETF and the Invesco S&P 500 Quality ETF as portfolio tools and, increasingly, multifactor ETFs or factor rotation funds such as the Invesco S&P 500 QVM Multi-factor ETF and the Invesco Russell 1000 Dynamic Multifactor ETF to build a more efficient core for their portfolios.

Institutions that have utilized Invesco ETFs include the $14.5 billion Municipal Employees' Retirement System of Michigan. According to its 13F holdings report for the quarter ended March 31, Lansing-based MERS held three Invesco ETFs, including the Invesco S&P 500 QVM Multi-factor ETF. Collectively, its investments across those three ETFs totaled roughly $1.3 billion. An Invesco spokeswoman said "several large state and municipal pensions" hold Invesco ETFs.

Ms. McKinley also cited Invesco QQQ, which had assets totaling $191.5 billion as of June 1, as a fund institutional investors have used for decades. Invesco QQQ is an ETF that tracks the Nasdaq-100 index.

"Invesco QQQ is one of the largest and most traded ETFs in the U.S.," she said. "Institutional investors have used this fund for almost 25 years to express views on the market and efficiently trade risk."

Invesco continues to see interest in its products from additional institutions and consequently is committing more personnel to the space, including new hires, Ms. McKinley said in her comments.

Asked about the new hires, the spokeswoman said Invesco this year has hired three ETF specialists focused on institutional investors, whom she declined to name.

Ms. McKinley herself joined Invesco in June 2022 in the newly created global position. She previously worked at BlackRock, where she had served as a senior product strategist for institutional client engagement. Ms. McKinley reports to Anna Paglia, global head of ETFs and indexed strategies at Invesco.

"Institutional interest in ETFs is quickly growing and we are restructuring our leadership to ensure we are united with the needs of this client segment," Ms. Paglia said in a 2022 news release regarding Ms. McKinley's hiring. "I am excited that Emily will be bringing her expertise and innovative thinking to our interactions with the institutional channel."

Schwab Asset Management has witnessed an increase in use of its bond ETFs by insurance companies after several of the funds were added recently to the "SVO-Identified Bond ETF List" maintained by the National Association of Insurance Commissioners, according to Eliot Bishop, senior portfolio strategist for Schwab Asset Management.

The funds now eligible to be reported as bonds are the Schwab 5-10 Year Corporate Bond ETF, the Schwab 1-5 Year Corporate Bond ETF, the Schwab U.S. Aggregate Bond ETF and the Schwab U.S. TIPS ETF, Mr. Bishop said in comments provided via a spokeswoman.

"Fixed income ETFs with (an) NAIC designation can be reported as bonds or preferred stock by insurers, which allows for more favorable risk-based capital treatment," Mr. Bishop explained.