Exchange-traded fund (ETF) assets in Australia will double to $6.4 billion by the end of 2011 as investor demand for the product surged, according to BlackRock.
ETFs would become a more important part of investors’ portfolios due to incoming regulatory changes, new products and providers entering the local market, the firm’s global head of ETF research and implementation strategy Deborah Fuhr said.
“The government’s proposed ban on commissions and volume-based rebates in 2012, together with current moves by many financial planning groups to a non-commission payment structure, should further encourage the momentum in ETFs,” she said.
BlackRock owns iShares, the world’s largest provider of ETFs with $571 billion of assets.
“The challenging market conditions of 2008 caused a significant shift in investors’ risk appetite in their evaluation of counterparty risk and their desire for liquidity and transparency,” Fuhr said.
“During 2009 many investors turned to ETFs to help meet their desire for better risk and return and price transparency.”
The ETF industry’s assets in Australia have more than tripled over the last three years from $849 million in 2007 to $3.2 billion at the end of June 2010.
The growth is consistent with trends worldwide, Fuhr said.
She also said that Australia’s largest institutions are using ETFs for portfolio completion, tactical adjustments and rebalancing, or to gain temporary market exposure while transitioning assets from one external manager to another.
A Russell Investments survey in May found that 84 per cent of brokers and financial advisers expect to increase their use of ETFs over the next 12 months.
“As more advisers embrace the fee for service model ahead of regulatory change, investors and their advisers are increasingly attracted to the no commission, simple and tax effective structure of ETFs,” Russell ETF product development director Amanda Skelly said.
ETFs can be bought and sold on the share market just like stocks and generally track a benchmark.
