In a recent Morningstar interview, Scott Burns poses the question, “what are we seeing in the ETF market right now, trends wise? Who is buying these funds? Who is not buying these funds?” Scott brought in Tony Rochte, Senior Managing Director at State Street, to answer that question.

Tony says that, “Today there is over a 1,000 ETFs in the U.S. marketplace, over a trillion in assets. I think what’s been fascinating is really the last two to three years. We have seen much more in the way of volume from institutional investors and certainly hedge funds, trading sectors and the industries. So while there are many different types of users, we have seen an uptick in demand from the institutional community, and we think that’s had a lot to do with not only increased trading volume, Scott, but also increased assets.

If you look at the 10 largest endowments today in the United States, eight of the 10 actually use exchange traded funds in their portfolios. When you look at institutions, if you go back 8-10 years, they probably used futures and other derivatives, but as they became more and more comfortable with the profile of an ETF, the trading volume, where they can access it via their institutional broker, it became a natural. So we are seeing, frankly, more and more demand from those entities, but foundations and endowments, have used them for a number of years.”

You can watch the full interview below:

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