Funds under management of Australian exchange-traded funds increased by AUD1.7 billion (17 per cent) to reach a new record high of AUD11.6 billion in the first half of 2014, according to BetaShares.
Significantly, virtually all the growth in the half year was attributable to net new money, rather than market movements.
Over the last 12 months, the industry has grown by AUD4.1 billion representing a 53 per cent increase year-on-year.
Alex Vynokur, managing director of BetaShares, says: “The ETF industry has continued to go from strength to strength in 2014. Despite subdued price growth in the markets and relatively low product development activity, investor demand for ETFs has not diminished.”
Local investors are increasingly using ETFs to access global markets, with around AUD500 million of net inflows into international equity ETFs in the first half of 2014. In addition, high yield equity exposures continued to be a major theme, attracting over AUD350 million of net inflows.
“We’ve seen the continued strength in global markets, particularly the US, reflected in ETF investor flows during the first half of the year,” says Vynokur. “Investors are also favouring yield-oriented products as the rates of return on traditional sources of yield remain at record lows.”
The most popular products by inflows for the first half of the year were the BetaShares Australian High Interest Cash ETF (AAA), the Vanguard Australian Shares ETF (VAS) and the BetaShares Equity Yield Maximiser managed fund (YMAX).
Vynokur says he expects the rapid market growth to continue, with activity particularly picking up on the product innovation side.
“The future of the industry looks bright and we retain our original forecast of an industry size of AUD13billion to AUD15 billion in FUM by the end of 2014, most likely at the higher end of this range. We also expect significant new launches in the second half, after a slow 12 month period for product development, likely to be a further catalyst for growth in funds under management.”
Australian equities ETFs won back some ground from international equities products in the last month of the financial year, with broad-based and high-yield domestic equities exposures being the largest two categories for inflows.
Australian equities products attracted just over AUD200 million of the total AUD369 million that flowed into ETFs over the month, marking another strong month of growth for the industry as a whole.
“We have seen investor confidence in domestic equities return over the last few months, suggesting a bullish sentiment towards the Australian share market as well as internationally,” says Vynokur. “This optimism is also reflected in the fact that outflows in June were minimal, restricted to only a few emerging markets exposures.”