ETFs have been rising in usage across investors, but may fit in best with smaller institutions.

State Street Global Advisors’ (SSgA) family of exchange traded funds (ETFs), the Spiders, are often deemed as one of the market’s founding fathers.

“ETFs are in our heritage,” said Jim Ross, senior managing director and global head of SPDR Exchange Traded Funds at SSgA. “We think passive is massive.”

But is ‘passive’ in fact ‘massive’ for massive institutions? Not necessarily, according to Murat Unal, founder and board member of German-based institutional consultancy, Funds@Work AG.

“Institutional penetration among ETF providers is still relatively low,” Unal said. “There also seems to be a correlation between the size of the institutional investor and its ETF exposure. The lower the assets under management, the higher the probability of exposure to ETFs in general.”

For those that make the case for ETFs due to their relatively low cost nature, Unal’s assertion rings true. Large institutions, with large asset sizes, generally like to keep investing as active and proprietary as possible—typically employing ETFs in their portfolio to hold exposure while in between replacing managers.

“If you asked the Harvard if they use passive instruments, or consultants, they’d laugh,” said an unnamed source. The university’s endowment fund has approximately 32 billion under management.

In keeping with the large institutions’ ‘do it yourself’ mindset, large endowments and foundations generally may not favor ETFs, external consultants, but rather, will rely on in-house staff and asset allocation models, the source said.

For Unal, less reliance on ETFs can help eliminate trading risk for these institutions.

“Institutional investors put less emphasis on trading through the stock exchange, but rather prefer to directly create and redeem with the ETF provider.”

Such a preference comes from “mixed experiences with brokers, market makers, designated sponsors but also their investment horizons,” Unal said.