Liquid Alternative ETFs Are the Next Frontier in Institutional Investing

Written by:  In a study commissioned by IndexIQ, Greenwich Associates recently interviewed senior fund managers at large U.S. institutions to determine how those investment professionals are currently employing alternative asset classes and ETFs in their portfolios. The study revealed an evolving trend towards more extensive use of liquid alternative ETFs by institutional investors in specific situations Among the key takeaways from the study:
  • Greenwich Associates projects that institutional investments in liquid alternative ETFs will more than double in the next 12 months.
  • Nearly 20% of institutions not currently investing in liquid alternative ETFs say they will consider using them in the year ahead;
  • Roughly 1 in 10 current investors plan to increase allocations to liquid alternative ETFs in the next year;
  • Relatively low costs, liquidity, transparency and diversification are cited as the main benefits of liquid alternative ETFs;
  • Among the main implementation cases, transition management, fund of funds replacement and core allocations are cited as the most common uses for liquid alternative ETFs
Greenwich Associates suggests that liquid alternative ETFs, while still in their very early stages in the institutional marketplace, are projected to follow a similar trajectory of adoption as ETFs and liquid alternatives and are poised for long-term growth within institutional portfolios. To learn more about the growth of liquid alternative ETFs within the institutional space, download the full Greenwich Associates Institutional Liquid Alt ETF report.

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