"ETFs are really like a Swiss Army knife, there's so many use cases for 'em," said Matthew Bartolini, a managing director and head of SPDR Americas research at State Street Global Advisors, which ranked third on the list of top ETF/ETN index managers with $1.12 trillion in assets as of June 30, up 13.8% for the year.
"An ETF can be used as a strategic buy-and-hold low-cost position, or a tactical trading vehicle due to abundant secondary market volume, or as a hedging exposure given the ability to go short the ETF or utilize options based on the ETF," Bartolini said.
Back in 2022, when both equity and fixed-income markets fell sharply, "it was a harder slog from just an asset perspective, but investment was still there," he said. In fact, during that calendar year, U.S.-listed ETFs, the vast majority of which are passively managed, had some $596 billion of net inflows, excluding mutual fund to ETF conversions, he said.
"And then this year, you have positive market effects," Bartolini said. "Even though fixed income is down a little bit this year, equities are broadly up."
Asked what has fueled the 99.9% jump in ETF/ETN assets over the past five years, he pointed to what he called the "four Cs" — cost, choice, comfort and clients.
"ETFs are uniquely lower cost, and I think everyone would like to pay less and get more," Bartolini said, adding that when it comes to the level of choice, both the number and the variety of products available in the ETF wrapper have increased significantly.
As for comfort, ETFs, as they did during the COVID-19-related market turmoil experienced in March of 2020, have proven to be "a really valuable tool in your portfolio for liquidity in times of stress," he said.
And, more "client types" are adopting ETFs, Bartolini said, pointing to insurers as an example.
"Insurance firms are gravitating towards fixed-income ETFs due to changing regulation on how they can treat fixed-income ETFs," he said.
Emily McKinley, head of institutional ETFs and models at Invesco, said one notable way institutional clients are using ETFs is to achieve operational efficiency. ETFs can reduce the work of managing a core exposure or provide efficiency during "friction points" in the portfolio, she said.
"And I truly have seen it from the smaller, understaffed pensions all the way through to the largest ones because I think anything — any tool — that's going to make your life easier and your outcomes better is always welcome," McKinley said.
Invesco ranked fourth with $464.9 billion in ETF/ETN assets as of June 30, up 21.2% from a year earlier.