Security of their bitcoins, their fund and privacy as well as anonymity are different. They maybe don't care about privacy and anonymity but they must care about security of their fund and their bitcoins.
If they store their bitcoins on centralized exchange, their fund security is unknown and they can not control what is doing by the exchange with their money there. It's not their Bitcoin private key, it's not their bitcoin too.
About investment profit, let's say you only can get profit if you can protect your initial capital and don't lose it. If you store your fund on a centralized exchange that scam, exit and disappear or hack and die after that, your fund is lost and not compensated. In that case, you will not get any profit from your investment even Bitcoin price has grown a lot since your entry.
If it's about the "security of their Bitcoins", then investors are better off holding it themselves (self-custody). Don't you think? I mean, centralized entities are vulnerable against hacks, shutdowns, and government interference (single point of failure). Unless, they have some kind of insurance that would protect investors' funds from harms way. Do institutional investment firms provide such guarantees when offering spot ETFs? I don't think so. Yet, investors will prefer leaving their coins to a custodian out of convenience. As long as there's money to be made, nothing else matters.
While the number of long-term ETF holders is increasing, it shouldn't be a cause of concern to many. At least, not yet. Only within the distant future. Assuming institutional firms continue to purchase BTC until they hold most (if not all) of the circulating's supply. We'll see what happens in the long run.