Growth in the global exchange-traded fund (ETF) industry will not be driven by product innovation, but by investors finding different applications for these products, according to an ETF specialist.

"The opportunity is not so much the development of the product, but the education on how to use ETFs and the ways they can be used. That is an evolution that will see more growth," ETFGI partner Deborah Fuhr said in an interview with Investor Weekly.

"There are still quite a few people that have never tried them. They say they know what ETFs are, but what you often find is that unless they actually try them, they don't really know them.

"Once they do try, you tend to find that they discover ETFs work quite well and they find other applications."

The global ETF industry experienced inflows of US$67.3 billion in the first three months of 2012, a first quarter record and up 57 per cent compared with the $42.8 billion of inflows in the same period a year ago, according to data from BlackRock.

Institutional investors have been using ETFs for transition management, tactical positions and cash equitisation.

In the case of equitisation, institutional investors have long used futures to reduce the drag of excessive cash in portfolios, but Fuhr said ETFs could provide some benefits that futures could not.

"Superannuation funds lend out securities; if they lend, they will offset some of that cost [of ownership]," she said.

"You need to look at the real cost of ownership, which includes the ability to lend them out.

"ETFs are not always going to be the right products for everyone.

"If an institution is making a large allocation for a long time horizon, they can go for segregated accounts and find that the cost is less, so you tend to find that ETFs are often more tactical, or shorter term. [But] it also depends on size; the minimum size of a segregated account is quite large.

"We are increasingly seeing that ETFs are used in more ways and in larger sizes for longer-term allocations.

"It is part of the work that needs to be done with the client: are they better off using futures, a typical index fund, segregated account, certificate swap, or something else?"

Fuhr was the global head of ETF research and implementation strategy and a managing director at BlackRock and Barclays Global Investors from 2008 to 2011.

In February, she established her own firm, which provides consultancy and research services to clients who want to invest in ETFs.

"We've gone from an industry where people called everything an ETF, regardless of the structure, to now where everyone calls everything ETPs (exchange-traded products), which I don't think gives a level of clarity that I think is really necessary for people to understand the structures and nuances that are important from a tax and regulator perspective," she said.

"We help clients get a better handle on the products that are out there."

Fuhr is in Australia to speak at the Australian Securities Exchange ETF Conference for institutional investors in Sydney today.