The Australian exchange-traded fund (ETF) market rose to a new all-time high of AUD12.7 billion in September, despite a falling local share market, according to the BetaShares Australian ETF Review for September.
In addition, an all-time high was registered in dollar value traded for the month.
The industry grew by approximately AUD300 million over the month, driven almost exclusively from new money inflows rather than market movements, reinforcing the increasing popularity of ETFs as a portfolio tool.
Buying activity increased heavily in currency and fixed income ETFs, as investors looked to profit from the decline in the Australian dollar and the gradual rise of bond yields. Average trading value across the ETF market as a whole increased 44 per cent month on month, reaching an all-time high of AUD1.5 billion.
“Investors are increasingly using ETFs in a tactical way, making use of a range of products to express a view on the market and seeking to profit from the fluctuations across a range of asset classes,” says BetaShares managing director Alex Vynokur.
“The decline of the Australian dollar to a four-year low against the US dollar this month, for instance, drove investors to the BetaShares US Dollar ETF in hopes of capitalising from a further fall. Similarly, the continued debate around global monetary policy is creating more interest in fixed income products, which have proven popular with ETF investors overseas but are yet to really take off in Australia.”
Looking ahead, Vynokur notes an expectation of continued market growth for the rest of 2014, despite the current downturn in the ASX. “ETFs have proven their worth as an investment vehicle beyond the traditional ‘set-and-forget’ broad equities exposures,” he says. “We predict funds under management to continue to rise gradually as the year comes to a close, with new product development expected to be particularly strong in the last quarter of 2014.”