Australian financial planners who have become fearful of direct share investment following near corporate collapses of listed firms like Centro and Allco are diverting money into exchange traded funds (ETF).
Planners are driving growth in ETFs as they shun direct shares after the global credit crunch revealed companies with massive debts, Barclays iShares Australia co-head Adam Seccombe said.
Share price values of certain firms including Centro Properties Group, ABC Learning Centers, Allco Finance Group and Octaviar have plummeted over 85 per cent.
In a volatile environment ETFs are providing planners with a great opportunity to prove their worth to clients, AltaVista Independent Research president Michael Krause said.
“You can allocate your assets very cleanly and efficiently. That in turn makes you more valuable to the client,” he said.
“It is no longer about picking a manager at a listed investment company and turning your clients over to that manager in the hope they will deliver a decent return for that client.” Krause said.
ETFs are listed funds which can be bought and sold like shares and are designed to mimic the performance of an index such as the S&P/ASX 200 or the Dow Jones Industrial Average.
Barclays Global Investors 14 iShares-branded ETFs, which listed on the Australian Securities Exchange (ASX) in October, already have $1 billion of assets under management (AUM) each. Four of the iShares have $10 billion in AUM while one has over $50 billion in AUM.
Barclays iShares ETFs provide investors with exposure to benchmarks like MSCI South Korea, FTSE/Xinhua China 25 and S&P Global 100.
