Following a slight dip last month, the Australian ETF industry gained 1.7 per cent month-on-month in May to reach $198.3 billion, a new all-time record high.
The top performer in terms of returns was the Global X 21Shares Ethereum ETF, achieving a 22 per cent increase.
Two more alternatives followed, including the Global X Hydrogen ETF (HGEN) and the Global X Physical Silver Fund (ETPMAG), which saw gains of 19.1 per cent and 14.5 per cent, respectively.
Speaking to InvestorDaily, Global X ETFs chief executive Evan Metcalf explained that bitcoin’s global popularity fuelled the growth of Ethereum and its Global X 21Shares Ethereum ETF.
“Ethereum and bitcoin tend to follow each other, to an extent. There’s definitely a correlation there,” said Metcalf.
Bitcoin’s popularity, particularly in an ETF wrapper, exploded following the US SEC’s approval of 11 spot bitcoin ETFs in January. This decision was followed by the SEC granting an initial round of applications for Ethereum ETFs, with the full approval expected in September.
“That news, you know, we’ve seen the experience of bitcoin, and so that’s prompted people to look at it as a potential opportunity as well,” said Metcalf.
“I don’t think the size of the market is a bit smaller. I don’t think we’re going to see the same level of uptake [in Australia], particularly the kind of astounding numbers that you’ve seen in the US market. But yeah, I would expect there to be some strong interest in those products when they come to market as well.”
Moving on to how its hydrogen ETF found itself in the top five performers in May, Metcalf said hydrogen got its time in the spotlight due to the prevailing focus on renewable energy.
“I think [hydrogen] has been another interesting area, definitely, with interest rates moving higher over the last few years,” Metcalf told InvestorDaily.
“Companies, which are at the, I guess, low end of the innovation cycle, they’re bringing to market very new technologies, and they often aren’t very earnings positive.”
Global X anticipates a near doubling of global hydrogen demand from 2021 to 2030. In response, HGEN strategically invests with a global focus, spanning various industries to capitalise on this growth trajectory.
Moreover, locally, the government’s Future Made in Australia is expected to boost the focus on hydrogen, with Treasurer Jim Chalmers revealing in the May budget that some $19.7 billion will be invested over 10 years to accelerate priority industries, including renewable hydrogen.
“There’s a little bit more interest in that space as well, and there’s been some strong results coming out of some of the companies involved there at the larger end,” Metcalf noted.
Turning to ETPMAG, Metcalf explained this exchange-traded product (ETP) is supported by physical silver, ensuring that each silver bar is segregated, individually identified, and allocated. Silver has historically been sought after by investors as a potential store of value and boasts a variety of industrial applications, especially in the electronics sector.
“Silver is a physical asset, ETP as well. So it’s just tracking the price of silver in Australian dollars, and that’s been a very, very strong market recently,” Metcalf said.
“Silver is kind of an interesting commodity in that it’s half an investment asset, in a store of value, and it’s also half an industrial metal as well, and it’s used in a lot of climate friendly technology.
“So we’ve seen hydrogen bounce, we’ve seen some of the renewable energy plays coming back into focus in the last couple of months as well, so silver has definitely benefited from that.”
The CEO noted that silver tracks gold’s performance “quite closely”, although silver trailed behind after gold’s significant surge in 2024.
Despite this, he assured that there’s “quite a strong sentiment” around silver, alongside increased activity in the space.
“We are seeing strong investor interest in that,” Metcalf concluded.
In April, data from Global X revealed that while thematic ETFs are being favoured by investors, those tracking the energy transition are being left behind.
While the energy transition dominated thematic ETF inflows in 2023, according to data from Global X, they fell out of favour with Australian investors in 2024 to become the poorest performers among their thematic peers in the year to 31 March.
At the time, Marc Jocum, Global X ETFs product and investment strategist, said outflows in 2024 could have less to do with energy transition ETFs themselves and more to do with the increasing popularity of areas such as technology, semiconductors, cyber security, and artificial intelligence.
However, if HGEN’s performance is anything to go by, energy transition ETFs maybe making a comeback. Moreover, with a focus on renewable energy, technological innovation, and traditional commodities like silver, investors appear to be navigating a dynamic landscape by tapping into opportunities across both thematic and traditional sectors.
