ETF Exploring the catalysts driving health and hospital systems’ ETF usage

H&H systems are investing in a more complex operating environment. Lean investment teams are managing multiple pools of capital while margin pressure has increased the need to preserve liquidity for short-term operational demands. At the same time, these organizations still need long-term growth potential to support their broader missions. That combination has made scalable, liquid implementation tools more important—and helps explain why many H&H systems have turned to exchange-traded funds (ETFs).

To understand how and why 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 executives at three H&H systems. The findings show several H&H systems have relied heavily on ETFs for liquidity management, tactical positioning, transition management, and long-term allocations.³

Finding the right solution to balance multiple objectives

Many H&H systems are trying to balance multiple investment objectives with reduced resources and tightening bottom lines. A single H&H system, for example, often runs a heterogeneous mix of investment pools—from endowment-like board-designated funds to cash pools to defined benefit plans—with a limited number of in-house investment professionals overseeing all of them. Furthermore, increasing labor, supply, and other non-labor costs, along with the shift toward outpatient care, have compressed margins across the industry. Thinner margins have increased H&H systems’ reliance on board-designated funds for operational support and expanded the investment objectives of their pools from long-term growth and capital preservation into liquidity management.²

That combination—multiple pools, lean teams, and a premium on liquidity—has created favorable conditions for ETF adoption among H&H allocators. According to Cerulli’s research, total ETF assets in the channel grew from $13.3 billion in 2020 to $27.7 billion in 2025, a 15.8% five-year compound annual growth rate. ETF allocations also made up 3.2% of H&H systems’ portfolios in 2025, the highest share among all institutional channels.¹

Putting ETFs to work in a variety of ways

H&H systems had some of the most varied ETF applications among institutional channels, reflecting the segment’s distinct needs. They have used ETFs to manage cash, maintain exposure through manager transitions, express tactical views, and increasingly establish long-term core positions. H&H systems surveyed consistently pointed to ease of use, liquidity, and intra-day tradability as the key ETF characteristics they value.² For organizations that may need to fund operations while maintaining market exposure, the ability to move quickly is especially important—and something the ETF wrapper can help enable.

System size has also influenced how ETFs are deployed. Larger H&H systems are more apt to use separate accounts for core exposures while deploying ETFs operationally and tactically, including for cash management or portfolio tilts. Smaller systems more often incorporate ETFs directly into their core portfolio holdings. In some cases, ETF holdings are significant: a couple of H&H systems held more than $1 billion in ETF assets as of year-end 2025. Adventist Health System Sunbelt Healthcare Corporation, for example, allocated more than $3 billion across 15 fixed income and equity ETFs.²The table below is based on 13F filings by each of these organizations. It should be viewed as a representative but conservative estimate of ETF usage given that many H&H systems use ETFs via managers that will not show up in 13F reports.

Several H&H systems hold sizable ETF positions

Top five largest US H&H systems by 2025 US ETF AUM

ETFs in action: How an H&H system used index-tracking ETFs for core equity exposure

One US health system with $5 billion–$10 billion in assets illustrates how far the long-term ETF allocation use case can extend. Using approximately five index-tracking ETFs across US and international equity, the institution holds 100% of its US large-cap equity exposure in index-tracking ETFs, along with most of its developed international and emerging markets equity exposure. These ETFs are long-term allocations, typically held five to 10-plus years.²

Comfort with the ETF structure has grown alongside usage. As an executive at another H&H system described it, their team’s adoption of ETFs came down to familiarity and improved market dynamics, including the length of time ETFs have been available, lowering fees, and fewer liquidity concerns. For that organization, the two levels of ETF liquidity, through the creation and redemption mechanism and through secondary market trading, were persuasive enough to bring the broader organization on board with using ETFs.³

Three ETF ideas for H&H systems to consider

H&H systems looking for practical implementation examples may want to explore:

• Invesco S&P 500 Equal Weight ETF (RSP): It is the fourth-largest equity ETF by institutional asset owner AUM.⁴ RSP provides equal-weight exposure to the S&P 500, which some institutions have used to broaden market participation and help manage concentration risk in cap-weighted indices.
• Invesco QQQ / Invesco NASDAQ 100 ETF (QQQ / QQQM): These ETFs offer exposure to the Nasdaq-100 and have been used by asset owners for both core exposure and tactical adjustments to large-cap equities.
• Invesco Senior Loan ETF (BKLN): The fund is among the largest fixed income ETFs by institutional asset owner AUM.² Asset owners have used it for senior loan exposure and, in some cases, as a placeholder while funding private credit capital calls.

Discover additional ETF insights

• Get the full report, Inside Institutional ETF Adoption: How asset owners are broadening use cases, to see how asset owner ETF strategies and use cases are evolving.
• Learn more about Invesco’s ETF capabilities and connect with our institutional ETF specialist team.