Who’s Buying What ETF?

August 09, 2016

If there’s one question that ETF wonks like me get asked all the time, it’s “Who owns ETFs?” More specifically, “Who owns this particular ETF?”

There are lots of reasons why a good answer to this question could be useful. If you’re an ETF issuer, you’d certainly like to know who’s been buying your products. If you’re a hedge fund, you might be looking for signals in the patterns of other investors' trades. If you’re an institutional investor, you might be trying to see if your allocations were representative or contrarian. As an individual investor or advisor, you might take comfort in seeing big endowments in a fund you’re interested in.

Because ETFs are exchange-traded (it’s in the name, after all) and settle just like a stock, it can be very difficult to know with absolute certainty who has beneficial ownership of every share. Even the Depository Trust Company, which has the ownership records for all ETFs and stocks in the U.S., doesn’t actually know which funds an individual owns. Instead, it just knows that a certain number of shares are sitting at Charles Schwab or Etrade, and from there, it’s that custodian’s responsibility to maintain the individual ownership records.

Digging Into Filings

But there are ways of ferreting out some of this. Large institutional investors are generally required to make quarterly filings of what they own on SEC form 13F. Mutual funds must disclose their holdings at least once a quarter, and so on. It turns out that all those reports rolled together can explain more than half of the $2.2 trillion in the U.S.-listed ETFs.

 

It shouldn’t be a surprise to see “Investment Advisor” and “Wealth Management” as the top categories here. Advisors—whether captive to a wirehouse like Morgan Stanley or independent—have been a huge growth engine for ETFs nearly since their introduction. What might be surprising to some investors is how small the allocations from hedge funds, endowments and pension funds are. While $67 billion across those groups is real money, it suggests that penetration into those markets still has room to grow.

 

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