North American pensions hold $157.5 billion in ETF assets, led by US public DB plans, which have increased ETF allocations at a 23.6% five-year CAGR.1
ETFs have been used primarily for operational and tactical purposes, but a growing number of sizable plans have been using them in long-term, strategic applications.
Pensions often cited ease of use and liquidity as the most compelling ETF features.
Pensions are using ETFs to help make portfolio implementation faster, more flexible, and more efficient. Once used largely to equitize cash, ETFs now help plans manage liquidity, navigate manager transitions, express tactical views, and, in some cases, maintain long-term strategic exposures.
To understand how institutional asset owners are using ETFs at scale, Invesco partnered with Cerulli Associates to survey the market and interview investment decision makers across channels, including 16 North American public and corporate defined benefit (DB) plans.1 The findings suggest pensions are not just participating in institutional ETF growth; they are helping define it.
Setting the standard for expanding institutional ETF usage
North American public DB plans were among the first institutions to allocate to ETFs, and they now lead all asset owner channels in ETF assets held. As of year-end 2025, they had allocated approximately $ 133.6 billion to ETFs.2 They are also among the largest individual holders: 17 of the 25 largest institutional ETF owners are public DB plans.3
These plans primarily use ETFs for operational purposes (liquidity management and manager transitions) and tactical purposes (short-term market or factor bets). But usage has been expanding: several large plans now allocate meaningful assets to ETFs for strategic, long-term positions. The Municipal Employees' Retirement System of Michigan, for example, holds nearly half its portfolio in ETFs.4
Canadian public DB plans hold roughly $30 billion in ETFs and include some of North America's largest individual ETF holders, reinforcing the link between plan scale and ETF adoption.2
Corporate DB plans are smaller ETF holders than public DB plans but remain meaningful users, with about $23.9 billion allocated to ETFs.2 Like their public counterparts, corporate DB plans tend to use ETFs for operational and tactical purposes.
Across public and corporate pensions, both total ETF assets and ETFs’ share of portfolio assets have grown. US public DB plans increased their ETF assets at a 23.6% five-year compound annual growth rate (CAGR), while Canadian public DB plans and US corporate DB plans grew their ETF assets at 3.9% and 2.5% five-year CAGRs, respectively, as of year-end 2025.2 Over the same period, ETFs’ share of US pension portfolios increased from 0.8% in 2020 to 1.6% in 2025 for public DB plans and from 0.7% to 1.1% for corporate DB plans.
Pensions have pointed to a similar set of reasons for turning to ETFs.
ETFs can give pensions a fast, flexible, and operationally efficient way to implement portfolio decisions, whether plans are putting cash to work, bridging a manager transition, or fine-tuning exposures.
One large US public DB plan [GG1.1]with $15 billion–$25 billion in total assets illustrates how extensively ETFs can be used within a pension portfolio. The plan uses 40 to 50 ETFs, with more than $8 billion held across equities (US large-, mid-, and small-cap, international, and emerging markets), fixed income, and commodities.
Rather than using ETFs tactically, this plan has adopted them as long-term core holdings within its strategic asset allocation. This pension partnered with Invesco five years ago to launch three multi-factor ETFs tracking US large, mid, and small-cap equities. They use these multi-factor ETFs side-by-side with equity beta ETFs to position their portfolio and express their views. On the fixed income side, they use index ETFs to target specific duration and credit exposures.
When selecting ETFs, its three main considerations are liquidity, tracking error, and expense ratio, with intra-day tradability a key benefit.4
“We’ve managed the S&P 500 in-house before, trading every individual security, rebalancing it on a quarterly basis,” said an investment analyst at the US public DB plan.4 “We’re just a small team and it just was not really worth it. Based off that experience, we did not want to be managing another index, so the ETF was the best route for us.”
Pensions looking for practical implementation examples may want to explore:
Important information
NA5840038
There are risks involved with investing in ETFs, including possible loss of money. Index-based ETFs are not actively managed. Actively managed ETFs do not necessarily seek to replicate the performance of a specified index. Both index-based and actively managed ETFs are subject to risks similar to stocks, including those related to short selling and margin maintenance. Ordinary brokerage commissions apply. The Fund's return may not match the return of the Index. The Funds are subject to certain other risks. Please see the current prospectus for more information regarding the risk associated with an investment in the Funds.
Most ETFs disclose their portfolio holdings daily.
The compound annual growth rate (CAGR) is the annual rate of return required for an investment or metric to grow from its starting value to its ending value, assuming profits were reinvested at the end of each year.
Diversification does not guarantee a profit or eliminate the risk of loss.
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