Asset owners such as pension funds and insurance companies are turning their attention to ETFs, as these investors contributed to a quarter of BlackRock's ETF inflows last year.
According to BlackRock's analysis of its iShares ETF ownership data, of these inflows, 25% were first time users of BlackRock’s ETFs.
This trend was mirrored in 2023, with new users accounting for 25% of institutional inflows into BlackRock’s ETFs and since 2020, there has been a 29% compound annual growth rate.
Additionally, the analysis found that around 40% of the largest pension funds in each European market use iShares ETFs.
Despite pension funds seemingly being at odds with the ETF structure – typically have long-term investment horizons which may not require the intraday liquidity that ETFs offer – 16 European central banks now rely on BlackRock ETFs, further underscoring their appeal to pension funds.
The analysis predicted a huge uptick in European defined contribution pension schemes, with assets projected to rise from $4trn today to $12trn by 2030.
This was tied to reforms in countries like the Netherlands, which will see $1.6trn of pension assets move from defined benefit to defined contribution.
In 2023, Japan’s Government Pension Investment Fund (GPIF), the largest pension fund in the world, allocated $3.7bn to track the Morningstar Japan ex-REIT Gender Diversity Tilt index, following a previous allocation of $3.4bn in December 2020 to a similar broad developed markets index.
More broadly, Dutch civil service pension scheme ABP shifted its liquid assets to passives, marking a major shift for the last Dutch provider that invests fully actively.
