New study finds public DB funds driving a 14.4% ETF growth surge over five years
Public and corporate pension plans in North America have nearly doubled their ETF assets in five years, and they are no longer treating the vehicle as an experiment.
Cerulli Associates and Invesco’s new study, Inside Institutional ETF Adoption – How asset owners are broadening use cases, estimates that institutional asset owners held about US$337.2bn in ETFs at year‑end 2025, up from US$171.9bn in 2020.
That represents a 14.4 percent five‑year compound annual growth rate (CAGR), far ahead of the 5 percent CAGR for the overall US institutional market over the same period.
The research looks specifically at public and corporate defined benefit (DB) plans, foundations, endowments, insurance general accounts, and health and hospital systems in the US and Canada.
Cerulli based its sizing on its own institutional surveys, 13F filings and National Association of Insurance Commissioners data, supplemented by other market sources.
Public DB plans dominate ETF usage by assets. US public DB plans held about US$103.4bn in ETFs at the end of 2025, while Canadian public DB plans accounted for another US$30.2bn.
Seventeen of the 25 largest institutional ETF owners are public DB plans.
Foundations and endowments together held US$89.2bn, while health and hospital systems, insurance general accounts, corporate DB plans and Taft‑Hartley plans made up the rest of the US$337.2bn total.
Although the typical channel‑level allocation to ETFs still sits in the low single digits – roughly 0.5 percent to 3.2 percent of assets – growth has been strongest in the segments that already lean heavily on public equities and alternatives.
Endowments, foundations and US public DB plans posted five‑year ETF CAGRs of 38.1 percent, 32.5 percent and 23.6 percent respectively, all ahead of the 19.6 percent growth rate for the ETF industry overall.
Cerulli identifies five main ETF use cases for institutional asset owners: gaining or maintaining exposure, cash and liquidity management, tactical bets, core portfolio holdings, and hybrid approaches.
The most common roles remain operational—transition management and cash equitisation—alongside tactical tilts using factor, regional or niche ETFs.
The study notes that some plans use equal‑weight factor ETFs, such as Invesco S&P 500 Equal Weight ETF, to reduce “Magnificent Seven” concentration in US equity allocations.
At the same time, a growing group of “power users” now treats ETFs as long‑term core holdings across equity and fixed income.
Smaller institutions often lean on ETFs as strategic building blocks because the vehicle has no minimum beyond a single share and offers low‑cost access to market‑cap‑weighted beta.
Some larger plans have also adopted substantial core ETF sleeves, using them where they regard active managers as unlikely to beat the benchmark and preferring to reserve fee budgets for higher-cost private market strategies.
ETF usage looks set to keep rising. Among institutions that already use ETFs, nearly half expect to increase allocations over the next 24 months.
Among non‑users, 16 percent plan to start using them over that period.
Drivers cited in the press release include improved liquidity, greater operational efficiency, a broader menu of ETFs across asset classes, longer performance records, the ability to deploy capital quickly in one diversified product, lower fees, and partnerships with issuers to bring new products to market.
Brendan Powers, director of product development research at Cerulli, frames the trend around innovation and implementation.
He says asset managers are still pushing out new ETFs, “most notably actively managed strategies and esoteric index exposures,” so asset owners need to monitor innovation and how to plug these funds into portfolios.
He adds that Cerulli expects ETF use cases “to grow especially for investment teams” that want to boost capacity, tackle liquidity issues, tap “unique investment strategies,” and “co-manufacture desired exposures.”
Index‑tracking equity ETFs remain the backbone of institutional allocations, particularly market‑cap‑weighted and equal‑weight core strategies.
However, the report notes that more institutional allocators are considering active ETFs, especially in fixed income, as products reach three‑ and five‑year track records.
ETFs that provide access to areas such as cryptocurrency, bank loans and emerging markets appear well placed to capture demand from institutions seeking efficient exposure to harder‑to‑reach segments.
The study also highlights case studies where asset owners have worked with ETF issuers to develop and seed new strategies tailored to their needs, an approach that pushes the structure beyond off‑the‑shelf beta.
Garrett Glawe, head of asset owner & consultant ETF specialists at Invesco, says the research shows that institutions now use ETFs for both strategic and implementation roles.
He says institutional investors are “no longer experimenting with ETFs” and now rely on them to build core holdings and fine‑tune portfolios.
Asset owners, he adds, use ETFs “to gain turnkey exposure” across asset classes and regions, manage US equity concentration risk, and “build public proxies for private markets.”
