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ETFs are gaining ground in Australia


A BetaShares/Investment Trends ETF report from Sydney, Australia finds that a record number of Australian investors are currently using ETFs. 

Overall, the number of investors using exchange traded funds increased 37 per cent to 202,000, up from 146,000 over the year to October 2015, exceeding the projected growth expectations from last year.
The report is a quantitative research study of Australian ETF users, based on responses of 9,418 investors and 676 financial advisers.
It revealed a strong latent demand for exchange traded actively managed funds as an unmet opportunity for industry growth in the next 12 months, with 61 per cent of financial planners citing an interest in using the products.
BetaShares Managing Director, Alex Vynokur, says: “Last year was a watershed year for the industry in Australia, and the report suggests that this fast growth should continue.”
Repeat investment into ETFs is very high with 71 per cent of investors indicating they would consider re-investing in ETFs in the next 12 months. The number of Australian self-managed super funds (SMSFs) holding ETFs has grown in line with the increase in the number of ETF users, with 41 per cent of the estimated 202,000 ETF investors (or 83,000) holding ETFs through their SMSFs.
The report says that this highlights the continued importance of this investor class in driving industry growth, and also indicates that a full 59 per cent of investors are buying these products outside of SMSFs, a number it is believed will continue to grow as ETFs become increasingly adopted by the broad investment community.
Diversification remains the primary reason individual and SMSF investors use ETFs. However, for the first time since the report has been published, access to overseas markets has become the next most important reason individual investors seek out ETFs, overtaking low cost.
The report revealed that the majority of ETF investors did not reduce usage of any other form of investment in order to invest, with 56 per cent of ETF users investing via money that was not currently invested in other investment products.
Financial planners’ appetite for ETFs continued to increase, with the report showing 44 per cent of advisers currently use ETFs, with an additional 20 per cent considering using ETFs in their practice over the next 12 months.
In addition, the extent of ETF usage is set to increase – while ETF flows comprise only 6 per cent of total financial planner flows, current users have allocated 13 per cent of new client flows to ETFs and expect this to increase to 18 per cent by 2018.
90 per cent of financial planners cited low cost as the top reason for recommending investment in ETFs.
Additionally, the report found that advisers who recommend ETFs, allocate 46 per cent of new ETF investments to international equities, up from 40 per cent in the previous year, overtaking domestic equities for the first time.
Looking forward, the report revealed a record number of 258,000 investors intend to make an ETF investment in the next 12 months.
“This research shows that ETFs are well on their way to becoming mainstream in Australia, just like they are in major global markets. Investors are increasingly realising the benefits that ETFs provide in terms of diversification, cost, transparency and access.
“Furthermore, exchange traded products are becoming more sophisticated with increasing appetite for defensive and managed risk exposures in addition to the active investment strategies underpinning exchange traded managed funds,” says Vynokur.

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