The number of institutional investors using ETFs increased 12% in 2008 with nearly 3,000 investors worldwide holding these funds, according to a report from Barclays Global Investors (BGI).
Of the 2,926 investors that reported using ETFs last year, the study found only 48 were pension funds.
BGI global head of ETF research and implementation strategy Deborah Fuhr says the low penetration among pension funds partly reflects their use of external managers.
She says: "Only the top few are able to buy and sell securities. The rest use external managers."
External managers fall under the investment advisers category which accounted for 2,152 users, the largest category, while hedge funds users totalled 438. The third largest users were banks and trusts with 193 investors.
Fuhr says: "During the market turmoil of 2008 investors became even more concerned about counterparty risk, transparency, liquidity and the use of derivatives and structured products.
She adds: "As a result, the use of ETFs to implement exposure to cash, fixed income, commodities and equity indices became more popular."
The report shows the overall number of institutional ETF users is up 105% over the past five years and up 952% over the past 10 years.
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