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Australian ETF market hits record high of AUD5.5bn, says BetaShares

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The Australian exchange-traded funds industry reached a record peak of AUD5.5bn in assets under management as of the end of August 2012, according to BetaShares’ Australian ETF Review for August.

BetaShares says the growth in market capitalisation of the ETF industry, which was 1.9 per cent for the month, was attributable to a rise in underlying asset prices rather than increases in units outstanding or new inflows into ETFs.

While yield strategies continued to be popular among investors through high dividend and cash products, the other notable trading trend among investors was significant inflows into international equities and the USD ETF, a likely reflection of increasing positive investor sentiment on overseas equities markets and the US dollar currency.

“The fund flows to international ETFs indicate investors believe it may be an opportune time to purchase overseas equities due to local currency strength, with buying across the S&P 500 and Global 100 ETFs. Alternatively, they are taking a view of the high Australian dollar declining from current highs through the USD ETF,” says Drew Corbett, head of investment strategy at BetaShares.

While funds flowed to yield and international products, commodities were again the best performing ETFs for the month with oil and non-gold precious metals the top five in terms of returns.

“We continue to see the commodities story providing opportunities for investors who look outside of traditional equities strategies. Agriculture is up 30 per cent in the last three months while August saw rallies in non-gold precious metals and oil,” he says.

Investors took a back seat this month in terms of ETF trading values, which dropped by 21 per cent for the month, suggesting risk appetite is subdued due to market volatility.

“While we saw a glimpse of risk-on activity during July, investors have again retreated to the sidelines this month as the traditionally robust resources sector shows signs of weakness with the slide in iron ore prices,” Corbett adds.

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