Australia’s exchange-traded fund market has hit an all-time record, surpassing $200 billion assets under management at the end of June.
The country’s largest ETF providers confirmed the news in separate statements this week, applauding the rapid expansion of the market, which kicked off the year at around $180 billion under management.
Global X noted that while it took the ETF market nearly 20 years to reach the initial $100 billion, the next $100 billion was achieved in just over three years.
While the firms, including Global X, Vanguard and Betashares, all based their figures on their individual analysis of ASX and Cboe data, they had slightly different parameters.
As such, Global X put the market size at $204.4 billion, Betashares had this figure at $205.3 billion.
In terms of inflows year to date, Global X put them at $10.8 billion, Betashares at $11 billion, and Vanguard at $10.67 billion.
Based on this data, Global X said the market is on track to surpass the calendar year record of $23.6 billion set in 2021 if the strong momentum continues.
“ETF net flows so far for 2024 have marked the best start to the year ever for the Australian market,” Global X said.
Betashares, too, said it sees the local ETF industry hitting $220 billion by the end of the year and increasing to $500 billion by the end of 2030.
“The Australian ETF industry continues to expand as the growing range of ETFs is allowing investors and their financial advisers to use the convenient and cost-effective investment vehicle across more parts of their portfolio, while the shift away from typically higher cost unlisted funds to ETFs is helping to reduce costs across investor portfolios,” Betashares CEO Alex Vynokur said.
Most popular ETFs
Breaking down the data, Vanguard underscored that nearly half (49 per cent) of inflows this year-to-date were into international equity ETFs, amounting to $5.28 billion, while Australian equity ETFs attracted $2.95 billion of investor capital over the half.
“The strong inflows into international equity ETFs evident over the March quarter accelerated during the June quarter, reflecting the eagerness of many Australian investors to capture the robust growth that has occurred on US share markets and other offshore markets,” commented Vanguard’s head of ETF capital markets, Asia-Pacific, Adam DeSanctis.
“At the same time, the investor inflows into Australian equity ETFs remained resilient, reflecting the positive performance of the broader domestic share market over the first half of the year,” DeSanctis said.
Betashares’ data equally showed that shifting investor sentiment had seen international and Australian equities return as preferred asset classes for ETF investors this year.
“There has been a shift so far since the end of 2023 as investors and their financial advisers return to international and Australian equities as market sentiment improves,” Vynokur said.
“We expect this trend to continue to drive flows into these two asset classes, alongside fixed income.”
Global X reported that the bulk of ETF investor flows continue to go into low-cost broadly diversified ETFs, with the Vanguard Australian Shares Index ETF and Betashares Australia 200 ETF continuing to occupy the top two spots on the list of the most popular ETFs in Australia.
This, the manager said, shows that investors prefer to use ETFs to gain exposure to overseas markets such as the US.
On the heels of Australian equity ETFs were fixed income ETFs totalling around $1.7 billion.
Looking into this particular area of the market, Vanguard’s DeSanctis said: “Vanguard’s global expectations for higher bond returns over the longer term have not changed, which aligns with our view that central bank interest rates are likely to remain elevated over the medium term.
“So, we expect ongoing interest in fixed income from investors seeking to tap into those higher rates via ETFs that primarily invest in investment grade government bond issues.”
All three fund managers also noted an increase in the number of active ETFs in the first half of the year.
Namely, Vanguard highlighted that out of 41 new ASX ETF listings, 28 were actively managed funds.
“The number of new funds listing on the ASX has been accelerating, and most of these have been niche investment products underpinned by complex trading strategies, sometimes through the use of debt and synthetic financial instruments,” DeSanctis said.
However, Global X highlighted that all but one of the bottom five least popular ETFs were active ETFs, “highlighting that index-based strategies remain preferred by Australian investors”.
