Speaking to InvestorDaily, Mr Howie – who is BlackRock’s head of ETF product and strategy – said Australia is growing quickly from a small base when it comes to ETF take-up.
“ETFs in the US are about 10 per cent of mutual fund assets. In Europe they’re about five per cent of mutual fund assets. In Australia they’re about 70 basis points,” he said.
But that said, the Australian ETF market is growing at 50 per cent a year, compounded, so in three or four years’ time it will be “a different ball game”, said Mr Howie.
“In Australia, we’ve [iShares] got about $4.4 billion in assets on the ASX. We’ve got another $3 billion-plus in assets in other jurisdictions,” he said.
“That $3 billion-plus is almost all institutional money. So institutions in Australia do use ETFs, but most of them trade offshore,” said Mr Howie.
The reason is that the first level of ETF liquidity (ie, ‘natural’ buyers and sellers in the stockmarket) is much higher in the US than Australia, he said.
Activity from Australian institutional investors has been on the rise in recent months, said Mr Howie.
“We had a $70 million trade in two of our Aussie equities ETFs from a multi-manager about two months ago,” he said.
BlackRock Australia is seeing $25 million to $30 million parcels of its emerging markets and US S&P 500 ETFs being traded every few weeks, he added.
“What’s happened is that some of these institutions are actually starting to do it in Australia on the ASX,” said Mr Howie.
“It’s early days, and the bulk of the trading is still happening in the US. What we’re seeing though is we’re entering that first stage of maturity of the Aussie market where institutions are seriously looking at the ETF as a real alternative."
