Assets under management of ETFs surpass $2.5 trillion

"As is often the case, the United States leads the way," the report adds. "Assets under management (AUM) of US$1.8 trillion are more than three times that of Europe, and growing at a faster rate."

Highlights of the report in respecting to the U.S. market include the following:

• Institutional use of the investment vehicles is concentrated among the largest ETFs and, thus, the three largest ETF sponsors: Blackrock, State Street and Vanguard.
• ETF providers are chiefly marketing their products to ETF strategists and mutual fund managers who provide guidance to financial advisors on the ETF component of portfolios for retail clients.
• Most ETF providers identify insurance general accounts as a secondary target market for their products. Insurers find the products attractive because they offer risk-adjusted returns.
• Fixed income ETFs also appeal to insurers because the National Association of Insurance Commissioners (NAIC) now allows the products to be reported in the companies' financial statements as bonds.
• Many insurers are not "operationally equipped to oversee ETFs" to gauge the risk exposure of the underlying securities.