Earlier this year, State Street made several predictions about the local exchange-traded fund (ETF) market, two of which it now says are unlikely to materialise.
The firm had forecast inflows into Australia’s ETFs to surpass US$30 billion and predicted that at least three global asset managers, each with over US$100 billion in assets, would enter the market. It also expected the ETF cryptocurrency market to expand with at least one new coin.
In an update this month, State Street said one prediction is on track, while the other two are “not yet”.
With PIMCO and First Sentier launching active ETFs locally, the second forecast is proceeding as expected. PIMCO, for example, launched four active fixed-income ETFs in February and hired Kanish Chugh from Global X as its head of ETF sales in Australia.
Meanwhile, First Sentier launched its First Sentier Geared Australian Share Fund Complex ETF in May, which seeks to deliver long-term growth by actively gearing a range of ASX 100 companies defined by strong balance sheets, ability to grow cash flows and liquidity.
While it has offered passive funds in Australia for many years, BlackRock also launched its first active ETF in Australia which sits in the US equity space. The ASX-listed iShares US Factor Rotation Active ETF offers an actively managed US equities strategy with annual fees of 0.45 per cent.
According to State Street, while the prediction about fund managers is on track, the other two forecasts are still pending.
Rather than US$30 billion ($46 billion), Australian ETF flows are tracking to stand at US$28 billion by the end of the year, it said. Meanwhile, cryptocurrency Solana is not yet offered in ETF format with only bitcoin and Ethereum options available so far.
While State Street is doubtful whether ETF flows will reach the target, Global X is predicting flows could reach as much as $50 billion, which would substantially outpace those seen in 2024.
Net flows into Australian ETFs in the first half of 2025 rose by 97 per cent to reach $21.3 billion, which was concentrated in Australian and global equity products. This compares to just $10.8 billion in the prior corresponding period.
“Historically, the back end of the year tends to see a surge in ETF buying momentum. If that seasonal pattern holds true, the ETF market could be gearing up for a blockbuster finish, with inflows possibly climbing towards the $40–50 billion range, leaving last year’s $31 billion milestone in the rearview mirror.”
