The local ETF market surged 37.2 per cent on the year to hit $206.2 billion across 380 products, with inflows reaching $21.4 billion on the back of positive market movements and numerous unlisted active funds converting into active ETFs, according to Global X.
The firm’s latest research shows that this is the first time the Australian ETF market has reached $200 billion.
“It took nearly 20 years to reach the initial $100 billion, while the next $100 billion was achieved in just over three years,” said Marc Jocum, product and investment strategist, Global X ETFs Australia.
“This exponential growth encapsulates Australian investors’ keen interest in using ETFs for their portfolios due to their low cost, simplicity, liquidity and tax efficiency.”
Looking at year-to-date net flows, Global X said they mark the strongest start ever for the local ETF industry, standing at $10.8 billion, and are potentially on track to surpass the calendar year record of $23.6 billion set in 2021 if the strong momentum continues.
“The Australian ETF market is growing at a faster rate than the USA (albeit from lower base) and has quadrupled its share in the Australian funds market over the past six years,” Jocum said.
He noted that while bond ETFs were one of the most popular asset classes in 2023 (capturing 37 per cent of the yearly net flows), investor positioning has changed to “risk-on” in 2024.
“Global shares have been the most popular asset class among Australian investors this year, with around $6 billion allocated to this category so far in 2024, representing 55 per cent of the total market net flows,” he said.
Moreover, over the past year, Global X said 70 new products were launched, with over half being active ETFs. However, while active ETFs have accounted for the bulk of new launches and make up nearly half of the industry’s total fee revenue, they only represent one-fifth of the total Australian ETF market.
Looking forward, GlobalX predicts three main trends that will unfold throughout the second half of 2024 include AI momentum, regional pockets of interest and the return of fixed income.
On the first trend, the fund manager said investors will continue to capitalise on the AI theme via ETFs, with opportunities across technology, semiconductors, infrastructure, and renewable energy in data centres.
Regarding regional pockets, GlobalX predicted European ETFs could attract more interest than US ETFs due to attractive valuations and similar sales growth profiles. It also tipped that India could overtake China as the main emerging market in investor portfolios.
Lastly, the fund manager said despite central banks cutting rates, the Reserve Bank may keep rates high due to persistent inflation. This makes fixed income securities with higher yields attractive, especially as share market dividends decline.
