Global investment firm Russell Investments is planning to launch an exchange-traded fund (ETF) for institutional investors.
"We are working with a number of institutional investors, including investment managers and superannuation funds, and educating them about the benefits of using ETFs. We do have plans to build a new suite of ETFs to be used by institutional investors in the near future," Russell ETF product development director Amanda Skelly said.
The firm has already launched an income-style ETF in the local market targeted at self-managed superannuation funds.
Skelly said institutional investors could use ETFs as portfolio management tools.
"Unlike futures, ETFs can qualify for the capital guarantee tax discount and receive franking credits, making them tax-effective. ETFs can also be used as cash equatisation strategies within a portfolio," she said.
As superannuation funds had a number of managers within their portfolios, ETFs could be a simple way of reducing unintended portfolio level risks, such as volatility, arising from a multi-manager portfolio, she said.
Russell ETF specialist Greg Friedman said globally institutional investors were the first to adopt ETFs.
"Retail investors in Australia have been the first to adopt ETFs. Overseas the initial take-up of the products has been from institutional investors," Friedman said.
"In the US, all of the large university endowment funds use ETFs, as do 17 of the large mutual funds and 15 of the largest hedge funds."
