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Australian ETF market continues upward trend


The Australian exchange-traded fund industry continued its upward trend reaching AUD5.7bn in assets under management, an all-time industry high, as at the end of September 2012, according to BetaShares’ Australian ETF Review for September.

While market capitalisation of the ETF industry grew 3.9 per cent for the month, this was attributable to a rise in underlying asset prices rather than an increase in units outstanding or new inflows into ETFs.

Currency hedged and unhedged gold products were popular among investors this month after the US announced its plans for a third round of quantitative easing in early September. Apart from the precious metal, income was again the prevalent theme with investors as high dividend and cash ETFs remained popular rather than fixed income.

“With QE chatter reaching fever pitch before it was officially announced, strong inflows into gold ETFs were reflective of investors looking to profit from the upswing experienced during QE1 and QE2,” says Drew Corbett, head of investment strategy at BetaShares.

Despite the debasement of the US currency, another popular ETF during September was the US Dollar ETF which suggests investors continue to believe the AUD may still be overvalued relative to the US Dollar.

“The US Dollar ETF trading activity was similar to the S&P 500 ETF, a fund which is almost four times the size in terms of assets under management,” Corbett says.
Investors slowly came back to trading this month as ETF trading values were up five per cent for the month but coming off a low base.

“Despite the slight increase in trading activity, ETF activity is still relatively subdued. Despite this, there were still returns to be found in the ETF industry with the top five performing ETFs on the ASX all returning over 20 per cent for the year to end September,” Corbett says.

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