Institutional investors are rethinking allocations to mutual funds in favor of exchange-traded funds (ETFs). Here’s a look at the numbers:

• A net 37% of institutions (calculated as the percentage of investors that expect to increase allocations less the percentage of investors that expect to decrease allocations) expect to increase allocations to ETFs in the next two years. Meanwhile, a net 11% expect to decrease allocations to mutual funds.

• On a channel level, this trend is most notable among insurance general accounts—a net 40% expect to increase allocations to ETFs over the next two years, while a net 25% expect to decrease allocations to mutual funds.

• Although ETFs are already widely adopted across institutions—80% of institutional investors surveyed by Cerulli report using ETFs—only 16% of institutions that use ETFs say they use the vehicle as a core portfolio holding. Asked the same question in Cerulli’s 2022 survey, only 8% of institutions indicated that they use ETFs as a core portfolio holding.

• At least 76% of institutional investors across channels employ passive equity ETFs. Insurance companies, which have the highest rate of adoption across all ETF types, use active equity and passive fixed-income ETFs at the same rate (78%).

What does this mean for mandates? For more on this, access The Cerulli Report—North American Institutional Markets 2024. Gain comprehensive market sizing and asset projections across key institutional client segments, including insurance general accounts, public defined benefit (DB) plans, single- and multi-employer corporate DB plans, foundations, endowments, and health and hospital systems.