Global exchange-traded fund investors continue to pour money into fixed income, with the category receiving over USD40bn in flows for the year, according to State Street Global Advisors’ (SSgA) latest global ETF Snapshot.
This brings the global ETF industry to over USD2.5 trillion in AUM as at the end of May.
“Global ETF investors are utilising fixed income investments for a variety of reasons including income, duration and importantly, to reduce overall portfolio volatility,” says Amanda Skelly, who heads up SSgA’s Australian ETF business. “This has included broad based bonds for diversification benefits, corporate and EM bonds for income and government bonds for duration.”
According to Skelly, this differs to the preferences of most Australian ETF investors, where interest in bonds is still in its infancy.
“Australian based investors are starting to recognise the benefits bonds offer outside of just income, but continued investor education is vital to seeing demand increase,” says Skelly.
Australian ETF growth continues to outpace the global ETF landscape, with AUM growing by 11 per cent compared to four per cent globally for the year to 31 May.
“Self-directed investor and advisor interest in developed international equities and Australian equities continue to drive this growth,” says Skelly. “Australian equity based-ETFs saw the largest inflows all year, indicating positive market sentiment despite expectations of softer domestic growth for the remainder of the year.”