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Australian ETF industry breaks multiple records in 2014

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The Australian exchange traded fund (ETF) market saw a number of key metrics reach record levels in 2014, according to BetaShares Australian ETF Review: Year End 2014.

The industry recorded its highest ever annual growth in 2014, with funds under management increasing by AUD5 billion (up 50% on 2013) to end the year at a new record high of AUD15 billion. Records were also broken for net inflows and trading value.

Net inflows contributed to 86% of the annual growth of the market in 2014, with approximately AUD4.3 billion of new money deployed into ASX-traded exchange traded funds. This was an increase of 180% on net inflows compared to 2013. The growth is particularly striking when compared to retail managed funds, which recorded an approximate 3% decrease in net inflows in the 12 months to end September 2014.

Trading activity also reached record highs, with trading value increasing 37% compared to 2013, as investors recognised that ETFs can serve both asset allocation as well as tactical purposes.

The top four ranking issuers by net inflows – iShares, Vanguard, BetaShares and State Street – captured 94% of the industry’s net flows. Twelve new products were launched throughout the year, a slight increase on 2013 (11 products were launched in 2013).

Alex Vynokur, Managing Director of BetaShares, says: “The Australian ETF market went from strength to strength in 2014. Products providing exposure to developed market international equities, particularly the US, were the largest beneficiary of inflows throughout the year, attracting approximately AUD1.4 billion.

“Australian high yield equity products attracted AUD720 million of new money, demonstrating the continued desire of investors for income, particularly as capital growth stalled in 2014. The Australian High Interest Cash ETF was also popular, recording an investment of AUD370 million of new money, as investors sought to balance their riskier allocations with the stability of cash.

“Outflows were generally very low and largely restricted to commodities, particularly unhedged gold, as gold continued to be eschewed by investors.

“Notwithstanding back to back years of +50% growth, we believe the Australian ETF market will continue to grow strongly in 2015 and forecast that total funds under management at the end of 2015 will be in the range of AUD21-23 billion. We also expect that the number of product launches will be significantly higher in 2015.

It was a great end to the year as December finished strongly, driven exclusively by underlying unit growth rather than market growth. Net new money for the industry hit an all-time monthly record of AUD593 million, with monthly trading value also hitting record levels.

“Mirroring the theme of 2014, highest inflows for the month were recorded in developed international equities products and Australian high yield equities exposures. The highest inflow by product was in the US Dollar ETF as investors continued to back a rising US dollar against the Australian dollar.”

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