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Institutional asset owners are rethinking ETFs
New research from Invesco and Cerulli Associates examines how asset owner ETF strategies and use cases are evolving.
INSTITUTIONAL RESEARCH
Drawing on primary interviews and Cerulli’s proprietary data and custom market analysis, this research provides a multidimensional perspective on how institutional asset owners are putting ETFs to work.
31 In-depth executive interviews
Representing $1B to $100B+ in institutional AUM
5 Distinct institutional channels
Representing asset owners across the US and Canada
200 Quantitative survey responses
Asset owner data diversified across channels
How asset owners are redefining ETF adoption
Institutional ETF usage is entering a more advanced phase. What began as a narrowly applied implementation tool is now being used more deliberately within portfolios as asset owners gain scale, experience and confidence in ETF-based solutions.
ETF adoption is accelerating
US and Canadian asset owner ETF assets have nearly doubled over the past five years to $337B USD, reflecting growing acceptance. While adoption varies by channel, ETFs have become increasingly legitimized as a core implementation tool for asset owners.
ETF use cases are expanding
While transition management, cash equitization, and tactical positioning remain core use cases, a growing cohort of institutions use ETFs as long‑term core holdings. More sophisticated users partner with issuers to co‑develop and seed customized strategies.
Issuer partnership matters
Asset owners are placing greater value on issuer capabilities beyond fees. Research, analytics, portfolio construction support and implementation expertise are becoming critical inputs in ETF selection decisions.
How different institutions use ETFs
Cerulli’s analysis of key ETF attributes shows that while ease of use, liquidity and low costs are valued across most channels, the importance of factors such as tax efficiency varies by segment.
Public defined benefit (DB) plans increasingly allocated to ETFs for liquidity, transitions and factor tilts, while a select group of power users heavily leveraged ETFs as core portfolio holdings. Similarly, while many Corporate DB plans pursued liability-driven investing (LDI) strategies, they also used ETFs to equitize cash, maintain or initiate exposures, or make tactical bets.
Public DB plan highlights
1.6%
Average portfolio allocations to ETFs
23.6%
5-year compound annual growth rate (CAGR)
Corporate DB plan highlights
1.1%
Average portfolio allocations to ETFs
2.5%
5-year compound annual growth rate (CAGR)
“ETFs serve as a really nice equitization tool in our toolkit to ensure that we’re fully invested and don’t incur much slippage in terms of tracking risk or any kind of opportunity cost.”
~Investment Officer at a $25B+ public DB plan
Favoring ETFs’ liquidity, low costs, low minimums, and simplicity, many larger foundations and endowments have used ETFs for a variety of tactical use cases. Their smaller counterparts have often used ETFs as core equity and fixed income holdings, freeing the investment team to focus on private markets.
Foundations highlights
3.0%
Average portfolio allocations to ETFs
32.5%
5-year compound annual growth rate (CAGR)
Endowments highlights
3.0%
Average portfolio allocations to ETFs
38.1%
5-year compound annual growth rate (CAGR)
“[Our relationship manager identified] a much cheaper ETF that we have. When you do the math, it almost perfectly correlates [with the other ETF under consideration], but it costs one-fourth of the price. That's a great piece of advice.”
~Managing Director at a $1-$5B Foundation
Health and hospital systems have taken a highly varied approach to ETFs, reflecting lean investment teams, multiple asset pools, and growing demands for liquidity and operational flexibility.
Health & hospital highlights
3.2%
Average portfolio allocations to ETFs
15.8%
5-year compound annual growth rate (CAGR)
"Our team was downsized a couple of years ago and just doesn't have the bandwidth [to conduct active manager research], and it's probably been futile lately [to try to beat the benchmark]. I don't know if it will always be futile, but lately it has been futile to attempt to add value in large-cap U.S. equity."
~Investment Director at a $5-$10B US health and hospital system
Insurance general accounts have often leveraged ETFs to maintain exposures, manage transitions, and initiate short-to-medium exposures. They have increasingly turned to active ETFs for targeted mandates and greater balance sheet flexibility.
Insurance accounts highlights
0.5%
Average portfolio allocations to ETFs
1.6%
5-year compound annual growth rate (CAGR)
MORE FROM INVESCO ETFs used by institutions
AUM data as of March 31, 2026
Important information
NA5349481
Cerulli Associates conducted a series of 31 executive interviews from 4Q 2025 through 1Q 2026 with investment decision makers at institutional asset owners with at least $1 billion in assets under management. The research also draws from Cerulli’s databases, including its Institutional Asset Owner Survey, U.S. ETF Issuer Survey, and institutional market sizings. Cerulli developed a custom U.S. institutional asset owner ETF market sizing using its proprietary asset owner survey data, 13F filings, S&P Dow Jones Indices, and other sources.
All quotes used with permission. The views expressed are those of the participants and are based on their own personal experiences and should not be a guide for future success as other individuals’ experiences may not be representative of the participants’ experiences. These opinions may differ from those of other Invesco investment professionals. The information on this site does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional/financial consultant before making any investment decisions. Invesco is not affiliated with Cerulli Associates.
Compound annual growth rate (CAGR) represents the rate at which an investment would have grown if it had grown at the same rate every year and the profits were reinvested at the end of each year. CAGR is not a true rate of return and is not influenced by interest rate changes or the volatility the investment might experience over the period.
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.
Invesco does not offer tax advice. Investors should consult their own tax professionals for information regarding their own tax situations.
Low cost: Since ordinary brokerage commissions apply for each ETF buy and sell transaction, frequent trading activity may increase the cost of ETFs.
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