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Australian ETF industry tops AUD12 billion in funds under management

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The growth of the Australian exchange-traded product (ETP) market accelerated in July to break through AUD12B in assets under management, reaching a new record high of AUD12.2 billion, according to BetaShares.

Funds under management increased by over AUD500 million – or 4.6% – during the month; driven by AUD300 million of new net inflows as well as the strong performance of Australian and global stock markets in July.

Alex Vynokur, Managing Director of BetaShares, says: “The rise in funds under management of about AUD500 million over the course of July needs to be considered in the context of the increase through the first half of 2014, which was USD1.7 billion. The rate of growth has accelerated.”

Local investors are increasingly realising that ETFs provide access to diverse asset classes, and not just Australian equities. During July, developed global equities was the sector that received the most inflows – more than AUD130 million. Cash and high yield equities were the next most supported sectors.

The most popular product by inflows in July was the BetaShares Australian High Interest Cash ETF (AAA), which has been the product experiencing the highest level of inflows in the calendar year to date.

“Several trends are evident,” Vynokur says. “As was the case through the first half of the year, investors continue to seek yield. It is also likely that some investors saw the general softness of stock markets outside Australia during July as a buying opportunity. Most crucially, though, investors are increasingly using ETFs as a flexible and cost effective solution to diversify their portfolios across different asset classes.”

As the attractiveness of ETFs is becoming more widely recognised, the trading values are increasing. Trading value increased by 19.2% in July relative to June – representing the highest level of ETF trading (by value) for 12 months.

Looking ahead, Vynokur noted that that the growth in funds under management was expected to continue. “Over the last few weeks, we have seen the pace of expansion accelerate, and this has been largely driven by increased investment in existing products. Looking forward, we anticipate that this growth will be bolstered as new and innovative products are brought to market through the remaining months of 2014.”

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