According to Global X ETFs Australia, the exchange traded product (ETP) industry will reach a record $200 billion in size by 2025, maintaining a strong pace of growth despite volatile share markets.
Over the 12 months to 24 March 2023, Australia’s ETP industry grew 7.1 per cent to $136.2 billion, with 301 products listed compared to 244 a year earlier, recent figures from the Australian Security Exchange (ASX) revealed.
Forty-two new ETPs were also launched and new asset classes were added to the market, including cryptocurrency and carbon credit exchange traded funds (ETFs).
Global X head of distribution, Kanish Chugh, predicted that market size will continue to increase as investors dip into the broadening range of ETFs listed on the ASX, which make up around 90 per cent of Australia’s ETP market.
“There are still gaps in the market for providers to list innovative investment solutions and ETFs are the most convenient and cost-effective vehicles for Australian investors to build their portfolios,” Mr Chugh said.
Namely, many investors turned to equity ETFs over the last 12 months as Australian shares outperformed global markets, held up especially by resources shares, including gold miners, Global X said. Sustainable themes, alongside short and long leveraged exposures, also drew increased interest from investors.
“There were also a significant number of environmentally conscious and sustainability focused ETFs launched, highlighting the shift in the ETF market to values-based investing,” Mr Chugh said.
He also highlighted Australian investors’ and providers’ innovative streak.
“Australia was also the first nation in the Asia-Pacific to list cryptocurrency ETFs, which highlights how local investors and providers are striving to innovate and leading the way in ETF product development and meeting investor demand,” Mr Chugh explained.
Looking ahead, Mr Chugh noted, Australian investors will be able to gain access to an ever-broadening range of ETFs to suit their investment needs, alongside gaining a “better understanding” of how to use ETFs over actively managed funds or listed invested companies.
“Global X has an exciting pipeline of products which will help enable this with already three ETFs launched on the ASX this year. Competition too is likely to increase in 2023 with the number of ETFs rising,” said Mr Chugh.
Acknowledging rising competition, Mr Chugh flagged the need for investors to look “under the hood” of ETFs to get a real understanding of the assets in which they are investing.
“On the provider side, it will become more important for ETP providers to deliver greater value to investors with a relevant point of difference,” Mr Chugh added.
Global X entered the Australian ETP market last year through the acquisition of ETF Securities through its parent company, Mirae Asset.
