The Australian exchange-traded fund (ETF) sector’s assets will jump 33 per cent to $6 billion by the end of 2011, financial services firm Russell Investments has predicted.
The growth would be driven by factors including providers taking advantage of broader investor community understanding of ETFs and more flexible regulatory conditions, Russell director of ETF product development Amanda Skelly said.
The ETF market grew from $3.1 billion to $4.5 billion in 2010, according to Australian Securities Exchange (ASX) data.
“A year ago ETFs were still regarded as a new product, but we are now seeing a lot of interest from a range of users,” Skelly said.
“In addition to their continued popularity in the core market of self-managed superannuation funds, ETFs are likely to win more acceptance from advisers and investment platforms in 2011, and also make inroads into institutions.”
Russell has forecast that up to 15 new ETFs and at least three new providers would hit the market this year.
However, it was likely the ETFs launched in 2011 would be more focused and targeted products, Skelly said.
“For example, ETFs will continue to expand across different assets, such as bonds and currency. ETFs based on equities will continue to target exposures to specific sectors and sub-sectors,” she said.
“There should also be new implementation methods for ETFs, such as derivatives-based approaches, where a greater portion of the ETF is invested in instruments such as futures, forwards and swaps.
“Whether Australian investors embrace this type of ETF will be something to watch.”
Russell also said it believed that if the Singapore Stock Exchange’s proposed takeover of the ASX succeeded, it would benefit the local ETF market by delivering greater secondary market liquidity and product diversification.
“However, if the takeover does not go ahead, Asian-based exchanges will continue to expand their ETF capabilities, attracting larger institutional investors, which may potentially limit the longer-term growth of ETF assets in Australia,” Skelly said.
ETFs can be bought and sold on the share market just like stocks and generally track a benchmark.
