PDF Trends in Institutional Presenter: Investor Use of Fixed ...

Trends in Institutional Investor Use of Fixed Income ETFs

Presenter:

ANDREW MCCOLLUM

Partner & Managing Director Greenwich Associates

Table of Contents

Role in Institutional Portfolios Drivers of Growth Institutional Fixed-Income ETF Outlook Conclusions

Greenwich Associates

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Role in Institutional Portfolios

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The Appeal of ETFs in the Institutional Market

Direct feedback from the institutional community.

"We have found a lot of new innovative products are

available in ETF form." ? RIA

"It started out as a tactical tool to temporarily hold cash; over time our use has evolved into permanent holdings." ? Insurance company

"ETFs allow me to diversify exposure to style, market capitalization and sectors that I would not be able to efficiently achieve trading individual names. The key word is diversification." ? Asset manager

"We use ETFs to fill out when we can't find individual bonds." ? Investment manager

"At times active managers have difficulty beating their benchmarks and ETFs are considerably less expensive." ? Pension fund

"We are making greater use of ETFs as we delve into other parts of the market that we would not access with individual stocks, such as European, international and emerging markets. Over time, we will make even greater use of ETFs as we try to tap additional areas of the market." ? RIA

Greenwich Associates

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The Root Cause of Growth

Regulatory and policy shifts upended fixed income markets, spelling uncertainty for its participants.

Fed Policy

Regulatory Shifts

? U.S. Federal Reserve - Low interest rate environment put in place to inject liquidity and help spur economic growth

? Dodd-Frank ? Limited size of financial institutions and lowered tolerance for risk market-wide

? Basel III ? Heightened liquidity standards for financial institutions

Dramatic increase of bond issuances in pursuit of cheap money flooded primary markets

Greenwich Associates

Confluence of regulatory restrictions constricted liquidity in secondary markets

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