Strong net inflows in the first half of 2017 raised the Australian ETF industry by 14 per cent (or AUD3.6 billion), to end the half year on a new record of AUD29.4 billion in funds under management (FUM), according to the BetaShares Australian ETF Review – Half Year 2017.
In the six months to June, net new money accounted for AUD2.8 billion (or 77 per cent) of the industry’s growth, with the rest of the gains coming from net asset value appreciation.
Trading value levels also reached record highs during this period, with an increase of 10 per cent compared to the previous half.
Passive index funds captured 74 per cent of this new money, while 20 per cent came from ‘smart beta’ funds, with financial advisers, in particular, driving growth of these funds.
Flows by issuer were concentrated in the first half of 2017. Approximately 70 per cent of the industry’s net inflows were captured by BetaShares (#1), Vanguard (#2) and State Street (#3).
BetaShares Managing Director, Alex Vynokur (pictured), says: “It’s been a very strong half for the Australian ETF industry, reflecting increased demand from investors and their advisers across a diverse range of ASX-traded vehicles. If this strong trajectory continues, we are setting the scene for a record year of asset growth”.
In contrast with previous years, Australian Equities funds took in the largest amount of flows (AUD1 billion), while the International Equities category followed at AUD915 million. Fixed Income also continued to receive good flows, with an intake of AUD400 million during the first half of the year.
“Fixed income is an area which we expect to continue to grow, as investors seek to create balanced portfolios using ETFs,” says Vynokur. “Such growth is expected to be supported by the increased product choice now available across both fixed and floating rate bonds,” he adds.
At a category level, Asian Equities (Broad Asia and Korea) and Geared US Equities were the top performers. In the six months to June, there was no broad category that recorded net outflows. Product development has remained relatively slow this year compared to previous periods according to Vynokur. A total of 14 new products were launched in 1H17, which contrasts with 23 products launched in 2H16.
“Compared to recent years, we have seen a slower pace of product development, which reflects the increased maturity of the sector. However, we expect this level to increase as new products are released to market in the second half of the year,” says Vynokur.
“Given the growth of the industry to date, we maintain the forecast we made at the end of last year and expect total industry FUM at end 2017 to be in the range of AUD32-AUD35 billion,” says Vynokur.
Despite the decline in net asset value in June, the Australian ETF industry added AUD342 million (1.2 per cent) in FUM. New money inflows totalled AUD695 million during this period.
Trading value increased 30 per cent month on month, setting a new, all-time record of AUD3.2 billion traded in June.
Product development was strong this month with six new launches including the BetaShares Australian Bank Senior Floating Rate Bond ETF (ASX: QPON), the first floating rate bond ETF available on the ASX. Additional products were launched in the Cash/enhanced cash space and single bond exposures.
BetaShares Strong Australian Dollar Fund (hedge fund) (ASX: AUDS) and BetaShares Global Banks ETF – Currency Hedged (ASX: BNKS) were the best performing products for the month.
