(Reuters) – Institutional investors lag their retail peers in adoption and use of exchange-traded funds (ETFs), according to a report by research firm Cerulli Associates.

These institutional investors, like endowments or state and local defined benefit plans, own nearly $1.3 trillion in ETF assets – making up just 4.2% of the ETF segment’s $31 trillion in U.S. professionally managed assets, the report released on Thursday added.

ETF issuers told Cerulli more than 80% of industry ETF assets come from retail rather than institutional clients.

“Some of the largest institutional investors prefer active exposures, may be well suited to invest in alternative investments, or use structures that offer greater customization, while the ETF structure is more likely to play second fiddle as a cash/liquidity management tool,” said Daniil Shapiro, director of product development at Cerulli.

Nearly 37% of ETF issuers surveyed for the report said the biggest challenge to broader institutional adoption of ETFs was the preference for other vehicles.

Limited ETF education was another big challenge, according to 26% of the survey respondents.

As the range of options among active ETFs grows and more ETFs reach the asset range to be attractive to institutional buyers, an opportunity exists to expand institutional ETF access, Cerulli’s Shapiro added.