Portfolio Management
In today’s volatile bear equity market, exchange-traded
funds’ percentage of the total U.S. equities market trading
volume now stands at about 35%, after peaking at 40% around late
October 2008, according to outlook report released by Barclays Global.
The decline illustrates that institutional investors are relying less
heavily on ETFs and getting back into stocks, a sign that risk
tolerance is returning.
Many institutional investors use ETFs to soak up cash in their
financial portfolio
management strategy and to make
them as hedge. Money is still flowing into ETFs, which are a basket of
securities that trade like individual stocks. In March, roughly $8
billion went into ETFs, compared with $4 billion for the first two
months of the year, according to data provided
by National Stock Exchange. Wall Street Traders say most of that push
in March was retail traders coming back into equities, thanks to the
20% rally in the broader indexes.
At the same time, institutional traders, which make up a much larger
percentage of the daily volume, are slowing down their ETF trading in
hopes of getting better returns. While an ETF can mitigate losses by
essentially spreading out exposure, it also limits upside greatly.
Many portfolio managers with ETF Portfolio Management believes ETF
activity for even institutions is more likely to grow than shrink in
the long term. Many portfolio
managers blog say that
investors will be
tentative
on stocks for years to come, making ETFs a more likely avenue
for large pools of retail cash.
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