The study, conducted by Greenwich Associates in July and August, studied institutional investors across the region to assess the extent of institutions' use of ETPs and to gain a better understanding of how the participating institutions employed ETPs within their portfolios.
Over 40 per cent of the asset managers and distributors who took part in the survey said they expected to increase their use of ETPs in the coming years, with an additional 46 per cent stating they would continue their current allocations to ETPs.
"In the Asia Pacific region, institutional allocations are estimated to comprise of the majority of the ETP assets under management (AUM) in the region," the report said.
"About 80 per cent of Asian institutions and distributors currently allocate up to 5 per cent of their assets to ETPs.
While this is a small proportion of their overall portfolios, this breakdown is similar to trends in other markets where institutional allocations are only a small percentage of their total investible pie".
According to Bloomberg data, the total value of AUM among Asia Pacific domiciled ETPs stood at roughly US$118 billion. SSgA head of exchange-traded funds Asia Pacific Frank Henze said institutions in the region were now managing more money than ever before, which would fuel the demand for more diverse investments.
About 50 per cent of respondents employed ETPs in equities covering Asian/emerging markets, domestic exposure, international and other regional equities, the survey said.
In addition, the use of ETPs for commodities was also frequently mentioned, meanwhile only about one quarter or less of Asian institutions used ETPs in various fixed income products.
The study found many Asian institutions viewed ETPs as one of the main ways to access desired exposures.
"Currently, institutional investors in Asia most commonly use ETPs for strategic applications such as obtaining investment exposures required in executing portfolio strategies and as a tool for hedging risk management," Mr Henze said.
"These strategic uses may represent longer-term allocations to the market, leading to stickier assets compared to allocations for more tactical purposes."
The three most common applications of ETPs amongst institutions in Asia were obtaining beta exposures when implementing core/satellite portfolio constructions, portfolio completion and hedging/risk management, the survey said.
