"Build it and they will come" seems an apt and optimistic saying for the Australian exchange-traded products (ETP) market, where strong growth in listings is not being matched by similar growth in trading volumes and values, and assets under management.

The number of Australian Securities Exchange (ASX)-listed ETPs soared from 57 to 82 over the year to August 2012, ASX data shows.

New exchange-traded funds (ETF) over fixed-income indices and cash, and exchange-traded commodities (ETC) have rounded out the market from an asset-allocation perspective, and there has been no shortage of genuine product innovation.

But the combined market capitalisation of ASX-listed ETPs has risen only 5.6 per cent, from $5.19 billion to $5.48 billion, over the year to August 2012.

It's unclear how much of this growth was because of a slightly stronger share market over this period, or because of fund inflows.

Care is needed with aggregate market capitalisation data.

The high weighting of State Street's SPDR S&P/ASX 200 ETF (about 40 per cent of total capitalisation) means the ETP market is heavily weighted to the performance of Australian equities.

The high Australian dollar has also affected assets under management in the second largest ETP, the ETFS Physical gold exchange-traded commodity, which is unhedged for currency movements.

Poor retail investor sentiment generally has affected assets under management.

Yet a doubling in the number of ASX-listed ETPs over the past two years - and much greater promotion and awareness among investors - has added only $1 billion in assets under management.

Even in a weak share market that is a disappointing result for a sector with so much potential.

The 12-month average trading volume of ASX-listed ETPs fell 2 per cent to 19,651 over the year to August 2012, and the 12-month average value of ETP trades is down 20 per cent from $692 million to $551 million. The average monthly trade of ETPs in 2010 was $579 million.

Proponents of ASX-listed ETPs expected much stronger growth, given the global boom in ETPs.

In April, BlackRock said the first quarter of 2012 was the best start to a year yet for the global ETP industry, with new net assets of US$67.3 billion.

BlackRock last year predicted Australia's ETP market would grow 20-30 per cent annually over 10 years and have more than US$10 billion in assets under management by 2013.

Convincing retail investors to buy ETPs, or listed investment products generally, is a tough ask in a bear market.

Negative publicity about poorly-labelled ETPs and the potential for synthetic ETPs to create another 'flash crash' in global equity markets may have dented investor enthusiasm.

Waning retail interest in equities is a big headwind for ETPs, given Australian and international ETPs account for at least 80 per cent of the market.

New fixed-income ETPs offer potential, but represent only 3 per cent of the ETP market at this stage.

For all the talk about institutional investors using ASX-listed ETFs, it seems many still prefer to use offshore-listed ETPs because of currency, liquidity or time-zone considerations.

Certainly, low growth in assets under management suggests local ETPs are struggling to get traction with institutional investors in large numbers.

Although asset growth is slow, conditions seem ripe for much stronger gains in ETP assets under management in the medium term.

Rapid product innovation has created a broader suite of ETPs and greater flexibility for retail and institutional investors.

More financial advisers are recommending ETPs and they are gaining favour in self-managed superannuation funds.

Inevitably, more Australian institutional investors will use low-cost ETPs to capitalise on strategic asset allocation opportunities and for cash equitisation purposes, and during transition periods in funds when money is allocated to new managers.

Issuers such as BetaShares seem to be making good progress attracting institutional investors and launching innovative products.

The big hope is that retail sentiment improves as problems in Europe subside, and more funds find their way to ETPs.

But if current asset growth rates persist, it is hard to see how an ASX-listed ETP market worth $5.48 billion can sustain 82 products, with presumably more on the way, from several issuers.