The demand for fixed-income exchange-traded funds (ETF) in the Australian market signalled increasing comfort with the ETF structure, iShares managing director Mark Oliver said yesterday.
“[Last year] was a year of heightened volatility and uncertainty so it’s not surprising to see investors’ flight to quality,” Oliver said.
“This segment is increasingly better understood. People seem to be comfortable now with the ETF structure as one that is robust in periods of volatility.”
The Australian Securities Exchange’s (ASX) operating rules allowed fixed-income AQUA products, including ETFs, to trade in Australia from 10 January 2012.
Up until 9 January, the Australian market was unable to access the fixed-income ETF suite that was available elsewhere in the world, but Oliver said he expected it to be a key feature as 2012 got underway.
“It’s also not something that’s offered to investors in other investment vehicles, so ETFs are really coming into their own and allowing people to express their opinions on that in a range of ways,” he said.
“It’s continued to prove resilient and will continue to be the go-to investment vehicle if volatility continues because you have transparency and flexibility and that’s been proven over multiple business cycles to have stood the test of time.”
According to the BlackRock Investment Institute year-end exchange-traded products (ETP) report, fixed-income ETPs were the sector’s fastest-growing asset category in 2011, increasing by $50.6 billion. Global fixed-income ETP assets now total $258 billion.
Oliver said the Australian ETF market was projected to grow further by 20 per cent to 30 per cent a year.
“Globally, that phase of growth slowed a little last year simply because people were trading less and the heightened level of volatility,” he said.
“What you see, particularly in the [United States], is a more mature ETF market with a lot more modularity to fixed-income exposures, so we’re seeing a lot more use of that modularity now.”
Australia’s ETF industry growth would accelerate with the expansion of other asset classes outside of equities and commodities, he said.
