Liquidity needs drive Canadian investors to bond ETFs: report

Canadian institutional investors are expanding the use of exchange-traded funds in their portfolios, using them for risk, liquidity and volatility management, according to a new report by Greenwich Associates.

The report found 58 per cent of Canadian institutional investors use ETFs strategically, with 63 per cent saying their ETFs have holding periods of one year or longer.

Read: How Canada is leading the way in bond ETFs

Institutional investors are using ETFs for international diversification (78 per cent), tactical adjustments (68 per cent) and core allocation (44 per cent), among other top uses.

Nearly half (47 per cent) of respondents said they’re using ETFs to manage liquidity. And 85 per cent of institutions cited ease of use as their top reason for turning to ETFs, with 80 per cent saying speed of execution is the most compelling reason. More than three-quarters of users look to ETFs for liquidity and single-trade diversification, particularly for bonds.

Read: Continued growth predicted as ETF industry tops $100 billion in Canada

In terms of asset categories, 90 per cent are invested in equities, with two-thirds of invested in U.S. and international equity ETFs, and 57 per cent investing in Canadian equities via ETFs.

Read the full article on Benefits Canada’s companion site, Canadian Investment Review.