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Australian ETF industry surpasses 80-plus year old LIC market

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The Australian ETF industry passed another milestone this month, with total funds under management exceeding the significantly more established Listed Investment Company (LIC) market, according to the latest BetaShares Australian ETF Review.

The Australian ETF industry continued its strong growth trajectory reaching a record high of AUD42.29billion in FUM. This is approximately AUD60m larger than the LIC industry (AUD42.23 billion) which dates back some 65 years before the first ETF was made available. The first ETF in Australia was launched in 2001, with the first LIC launched in 1936.
 
BetaShares CEO, Alex Vynokur, said of the industry growth: “This is a significant new benchmark for the ETF industry, especially given the relatively short amount of time since ETFs have been available on the ASX versus LICs”.
 
Even more striking has been the acceleration of the ETF industry’s growth post-GFC. Since 2009 to end September 2018, ETF assets under management have grown at a compounded annual growth rate of approximately 39 per cent versus the more subdued growth of the LIC market of approximately 11.5 per cent.
 
A critical part of the relative appeal of the ETF industry is its cost-effectiveness, with BetaShares analysis showing that the average asset-weighted fees in the ETF industry are 0.22 per cent pa, versus an average level of 0.66 per cent pa for the LIC industry (excluding any performance fees levied).
 
The ETF industry has also exhibited strong product growth since inception, with the number of products on the ASX now double the number of LICs (241 ETPs to 110 LICs).
 
Vynokur says: “Given the structural benefits of ETFs to investors, and the wide product range, we believe the ETF industry will continue to grow substantially more quickly than the LIC industry going forward – and we expect the industry to be double the size of the LICs within 4-5 years.”
 
The industry grew 1.6 per cent in the month of September (AUD663m), notwithstanding industry asset value growth was negative – with 100 per cent of the monthly growth being attributable to net new money rather than unit price appreciation. Net flows for the month were AUD839 million.
 
International equities continued to dominate net inflows, with AUD408m, more than double of the next category, broad Australian equities at AUD184 million. Fixed income ETFs also grew strongly with AUD154 million in net flows.
 
As predicted by the Review last month, product launches during September were significant with 11 new products launched, including technology-oriented exposures provided by BetaShares’ Global Robotics and Artificial Intelligence ETF (ASX: RBTZ) and BetaShares’ Asia Technology Tigers ETF (ASX: ASIA).
 
“Product development has been significant in September – the number of products launched this month is greater than the total number of products launched in the first six months of this year. We expect this trend will not abate for the remainder of 2018, with more products expected before the year’s end,” says Vynokur.

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