Investors’ Confidence in ETFs Continues to Grow, per State Street

State Street Global Advisors on Monday released the results of its 2024 ETF Impact Survey, which tracks financial adviser, institutional and individual investor sentiment toward exchange-traded funds, as well as investor attitudes and perceptions toward the economy and ETFs. Among other findings, the survey found that institutional investors who use ETFs are more satisfied than investors who do not.

Institutional investors were polled on their ETF usage, asset allocation and economic predictions for the year. These investors were most bullish about equity market performance, with 57% saying they expect the S&P 500 to end the year with a gain.

Among institutions surveyed, 67% were classified as heavy users of ETFs, meaning they use ETFs in their investment strategies extensively or frequently. ETF usage ranked highest amongst Japanese firms, with 82% of institutions in the country reporting they either frequently or extensively use ETFs. Light users of ETFs were described in the survey as investors who sometimes or rarely invest in ETFs.

Heavy ETF usage was lowest in Sweden, at 56%, with 8% of Swedish institutional investors reporting rarely using ETFs at all. In the U.S., 61% of respondents reported being heavy users of ETFs, the second lowest among all geographies surveyed.

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“There is still growing confidence that ETFs should be a core part of a diversified portfolio,” said Anna Paglia, State Street’s chief business officer, in a statement.

State Street Global Advisors found that 23% of institutional investors use ETFs in liquidity management and hedging. Another 19% said they use ETFs as core holdings for diversified exposure. Approximately 16% said ETFs are primarily used for tactical asset allocation and market timing, and 15% said they use ETFs to access specific markets, sectors or themes.

Approximately 11% of institutions reported use of ETFs for rebalancing, while 7% said they use ETFs for interim beta, cash equitization or transactions, and another 7% said they use ETFs for risk overlays. In the U.S., investors said they are most likely to use ETFs to access specific markets, while liquidity management was the top reason for U.K.-based investors. Swiss investors reported being more likely to use ETFs for tactical asset allocation and interim beta.

Institutions are also very likely to consider actively managed ETFs: 80% of those surveyed said they are likely to consider these ETFs, 16% reported being neutral on active ETFs, and 4% said they are not likely to consider them. Investors with heavy usage of ETFs were also more likely to be satisfied with their portfolios: 86% of institutions with heavy ETF usage reported portfolio satisfaction, while only 65% of investors with light ETF usage reported portfolio satisfaction.

Institutions with heavy ETF usage reported that liquidity is important to their investment strategy: 91% of these investors said it is important, compared with 68% of investors with light ETF usage.

The survey was conducted by research firms A2Bplanning and Prodege, surveying 576 global institutional investors involved in the decisionmaking of firms with assets under management of at least $1 billion. In the U.S, State Street polled 201 financial advisers, who advise on more than $25 million in assets each, and 319 individual investors with assets of at least $250,000.

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Tags: 2024 ETF Impact Survey, Anna Paglia, Asset Owners, ETFs, institutional investors, State Street, State Street Global Advisors

The Pension Benefit Guaranty Corporation projects lasting solvency for both its single and multiemployer pension insurance systems, per a projections report released on July 19.

The PBGC maintains two insurance programs, one for single employer defined benefit plans and another for multiemployer funds. The programs are funded by premiums. For 2024, single employer plans pay $101 per participant and $52 per $1,000 of their unfunded vested benefits. Multiemployer plans pay $37 per participant and do not have a variable rate premium.

According to the report, the single employer plan will remain solvent over the next 10 years, even in the most cynical and dire of economic and market simulations: “Even under the most extreme downside economic scenarios, the single-employer program does not fall into deficit during the projection period.”

The single employer program currently has a net surplus of $44.6 billion, and this is expected to grow to $71.6 billion by October of 2033.

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The projection for the multiemployer fund was also positive, but not as significantly. The projection period for the multiemployer program is 40 years, and the fund remains solvent over that time period in 61% of projections. However, the most pessimistic projection shows the fund becoming insolvent as early as 2037.

The report credits grants through the federal Special Financial Assistance Program for the health of the multiemployer fund. In the absence of the SFA Program, which gives cash grants to struggling multiemployer plans to shore up their solvency through 2051, the multiemployer fund, which otherwise would have had to fund them, would have become insolvent in 2026.

John Lowell, a partner in pension consulting firm October Three, says the report is “so positive for the single employer program that PBGC has sought out suggestions that might even include changes to the premium structure in order to encourage the adoption and continuation of more private sector pensions. [The] PBGC might consider proposing that premium levels be decreased and perhaps provide additional decreases for certain plan designs that inherently represent lower risk to PBGC,” such as risk-sharing pensions.

Lowell also notes that for the multiemployer fund, “the projections are highly volatile” because it is harder to forecast economic conditions for the industries, and therefore the employers, represented in multiemployer plans.

Tags: PBGC, PBGC premiums, SFA