Global equity exchange-traded funds (ETFs) experienced strong trading volumes in 2014 while trading in large Australian equity ETFs declined, says Morningstar.
In the research house’s ETF Investor report, Morningstar said there has been a clear “upward trend” in ETF trading volumes.
However Morningstar said this has not been uniform across all equity ETF products, highlighting a clear difference between the trading volumes of global equity and large Australian equity products.
“While volumes for global equity products have been strong, volumes for the large Australian equity ETFs declined or flatlined,” the report from Morningstar said.
“This is highly correlated with flows, with global equities attracting strong interest, while longer-running and larger Australian equity ETFs are more mature,” the report said.
Morningstar also pointed out there has been a “widening of options” in the Australian equity space with more income and strategic beta options being available.
“Nevertheless, these large Australian equity ETFs are still far more frequently traded than most rivals, with months of more than a million trades not uncommon,” the report said.
“In contrast, there are some small or niche ETFs that languish, with very little in assets or trading volumes, particularly in areas such as commodity ETPs.
“That’s another reminder of why we usually prefer products from established providers with solid asset bases,” it said.
Morningstar pointed out that people should consider the “big picture” when looking at trading volumes, where the industry as a whole is up.
“Though new ETP launches mean this volume is divided across an increasing number of products, there is a benefit to all (including ETP investors) as market-making becomes more sustainable and competitive as total volumes rise,” the report said.
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