From moving money between investment managers to fine-tuning a broader investment portfolio, Canadian institutional investors are increasingly embracing ETFs.

A Greenwich Associates report released Wednesday finds that more than a third of Canadian pensions, endowments, foundations, insurance companies and other institutional fund and asset managers expect to increase their use of ETFs in the coming year.

Discovering and implementing new functions for ETFs within existing investment portfolios as well as using them as a short-term stop for capital being pulled back from one place and deployed in another is what’s behind the increased interest among institutional investors, said Greg Walker, managing director, head of iShares Institutional Business, BlackRock Canada, which sponsored the study.

“Given the simplicity and flexibility of exchange traded funds, we’re not surprised that institutional investors are turning to ETFs more regularly to achieve their investment goals,” Mr. Walker said in a statement accompanying the report.

Among the report’s findings: institutional investors are increasingly relying on strategic ETF use as part of their broader asset allocation and tactical trading strategies; they are also using ETFs as part of their core portfolios alongside more traditional equity and fixed-income investments; and there is growing interest in particular for fixed-income ETFs.

The report also noted a shift in ETF use from equities to fixed income and other asset classes – which is more consistent with how ETFs are used among institutional investors in the United States.

Of those already regularly using ETFs in their portfolios, 45% of institutional funds and 31% of asset managers intend to increase allocations and move more assets to ETFs by next year, the study found.

More broadly, the study noted two main trends behind growing institutional fondness for ETFs. The number of institutional investors experimenting with ETFs is steadily growing since the stable of ETFs is growing increasingly diverse. And once they try them out, they typically start finding new and different ways of incorporating them into their investment strategies and processes.

The study also found some interesting trends in terms of asset allocation. More than 70% employ ETFs in equities, with institutional funds using equity ETFs most widely for Canadian and U.S. equity exposures and 83% of asset managers using equity ETFs for international market exposure, putting them ahead of domestic and U.S. equities.

On the fixed-income side, 50% of institutional funds and 45% of asset managers use ETFs in domestic fixed-income investments and 28% use ETFs for international fixed-income exposure. ETF usage is also becoming relatively common in other asset classes, with approximately one-third of institutional funds and asset managers using ETFs in REITs and another third of institutions using ETFs for commodities.