Zenith's 2014 ETF sector report – which highlights the key issues facing the sector – found the ETF market has grown 47.5 per cent from $8.4 billion the previous year, which the group says is due to the wider availability of ETF products for investors.
“With 96 available products in total, the sector now provides a significantly greater product suite across the mainstream asset classes and portfolio strategies,” the report from Zenith said.
“With the increasing scale of the industry have come greater levels of operational efficiency for users,” it said. “Growth in assets and greater activity with market makers has contributed to a widespread decline (and stabilisation) in trading costs.”
Zenith’s report also said Australian investors are continuing to “embrace the Smart Beta revolution” as they are recognising the potential Alternative Beta strategies have to deliver better risk and return trade-off than traditional market cap-weighted indices.
“The Alternative Beta story continues to show a lot of potential attraction and we see plenty of opportunity for these products as a low-cost option for some portfolio exposures,” Zenith senior investment analyst Dugald Higgins said.
“However, we continue our caution regarding Alternative Beta ETFs on several key fronts. Users need to be aware of the inherent characteristics of these products which are very different from traditional market-weighted strategies,” he said.
The report also found that despite being a relatively new concept for Australian investors, the Alternative Beta cohort is gaining traction, with funds under management outperforming the broader market.
