A new report published by global financial services company Computershare has revealed key trends in the Australian ETF market during the past year.
Computershare writes that it is the largest provider of ETFs in the country by number of investors as well as assets under management (AUM) and therefore has access to detailed data about the behaviour of ETF investors.
The 2023 Computershare ETFs Insights Report reveals the number of retail investors in Australian ETF registers the company administers has grown by 230 per cent since 2020.
The report shows that half (50.5 per cent) of ETF investors that the company oversees own only one ETF, with almost a quarter (23.7 per cent) owning just two.
The publication’s data also show that almost half 47.7 per cent of Australian ETF investors registered with Computershare have a portfolio of AUD10,000 or less, with 61.1 per cent of retail investors boasting portfolios of this size.
Ibrahim Hussein, Head of ETFs at Computershare Australia and New Zealand, said: “It’s clear that Australian investors are continuing their love affair with ETFs, with many factors driving the product’s continuing popularity, including easy-access trading platforms, lower fees and investors becoming more likely to move their disposable income into the share market since the start of the pandemic.
“We have also noticed a correlation between the growth of ETFs and the rollout over the past decade of the federal government’s Future of Financial Advice (FOFA) reforms, which requires advisers to recommend products in the best interest of their customers instead of products that yield the most commission.
“Australia is unique globally in that most ETF holdings on the stock market are directly held, rather than through a broker. This may give issuers a special opportunity to build investor loyalty and design better products by leveraging market data.”
According to Computershare’s report, its clients’ retail investors also now comprise the single largest ETF investor group that the company oversees in Australia: collectively their holdings far exceed superannuation funds (8.6 per cent), custodians (8.7 per cent) and companies (4.4 per cent) as well as those of Self- Managed Super Funds (2.9 per cent) and financial advisers (2.4 per cent).
Retail investors account for 11.5 per cent of Computershare’s Australian ETF AUM, which is equivalent to AUD17 billion. The only investor segment managing a greater ETF value is custodians, who have 26.7 per cent of ETF AUM, which is equivalent to AUD21 billion.
Communication and education
The company added that a potential factor contributing to most ETF investors holding just one or two of the products may be a lack of awareness about the extensive range of available ETFs.
Computershare said that this may represent an opportunity for issuers to educate investors on available options and potentially cross-sell within their existing investor base.
The company added that it was important for investors to seek independent advice on any product that they invest in.
Cross exposure
The report includes an analysis of the most common ETF cross exposures, providing issuers with a unique insight into how investors are using ETFs to construct their portfolios.
It found, for example, that investors who held large cap companies are also more likely to hold products that invest in ethical, healthcare, property and technology companies.
Investor locations
The report reveals that the total Australian ETF AUM originating from overseas is around AUD400 million, a modest amount (around 0.5 per cent of the total Computershare ETF AUM), with around half of this (AUD262.4 million) coming from New Zealand.
Investors based in New South Wales are responsible for almost half (48.2 per cent or AUD39.4 billion) of ETF AUM inside Australia, it added, while Victoria is responsible for less than a third (28.9 per cent or AUD23.7 billion).
