Anthony Chan of BlackRock looks at how institutional investors are using emerging market ETFs, and what this might indicate for the wider market.
Date: Mar 2011
With large amounts of money coming in, they can maintain exposure to the market without having to allocate immediately to a manager, he explained.
Plus, they benefit from the liquidity and being able to get in and out of the market very quickly.
Evolving use among institutional investors
Given their experiences in 2008, Chan said a lot of institutional investors are reviewing their traditional models of outsourcing the management of funds to external active managers.
Instead, he said they are starting to examine what they get out of these managers, adding that they realise they have to take more control themselves.
This might range from the simple use of an ETF to using ETFs for broad transition-management or exposure.
In one example Chan gave in relation to emerging markets, an investor who was looking for Asia ex-Japan equity exposure combined several ETFs in different ways to achieve this.
Investors have also started to realise that by dividing up the markets in different ways, this can add value through the asset allocation choice.