The funds under management (FUM) of Australia’s ETF industry fell by 2 per cent or $3.2 billion in 2022 to end the year at $133.7 billion, according to new figures released by BetaShares.
This came after the record $42 billion of growth seen for Aussie ETFs a year earlier. BetaShares reported that the ETF industry received $13.5 billion of net inflows in 2022, 42 per cent lower than in 2021, when inflows climbed to their highest level on record.
However, ETFs were found to have fared better than managed funds, as the local unlisted funds industry suffered its worst year on record with net outflows of $26.8 billion.
“In a highly turbulent year in financial markets, the ETF industry continued to take in new money from investors, even as asset values declined, making it one of the few bright spots in a very hard year for the broader asset management industry,” said BetaShares chief commercial officer Ilan Israelstam.
Strong trading values continued during 2022, with the annual ASX ETF trading value reaching an all-time high of $117 billion in 2022, up from $95 billion in the previous year.
Passive investing dominated with $16 billion of inflows compared to the $2.5 billion of outflows recorded in active ETFs. Within the passive category, index-tracking funds ($13.4 billion) overshadowed smart-beta ($2.6 billion) alternatives, but BetaShares noted that the latter did account for a record 19 per cent of total flows.
“Overall, the mix of flows by category shifted in 2022 versus 2021, with global equity flows more muted than in previous years — investors seemingly concerned over the market volatility experienced by global sharemarkets,” said Mr Israelstam.
“As such, it was the Australian equities category that led flows. Fixed income mounted a comeback versus 2021, to become the second most bought category of ETFs in 2022, with investors more willing to invest in this asset class as yield rises began to taper off.”
Australian equities ETFs received $4.4 billion of net flows, down from $5.5 billion in 2021, while international equities received $3.3 billion, well below the net flows of $11.8 billion seen in the previous year.
Meanwhile, BetaShares said that fixed income ETFs had a very strong year, receiving $3.6 billion of net flows, up from $2.9 billion in 2021.
On the outlook, the firm has forecast that the total FUM of the Australian ETF industry will exceed $150 billion at the end of this year.
“In terms of 2023, we believe that market conditions will continue to act as a hindrance to industry growth, but expect net inflows to remain consistently positive and ultimately that the industry will return to a growth footing,” Mr Israelstam said.
