The global ETF industry ended the first half of 2019 at a record high of $8 trillion (US$5.6 trillion), with investors flocking to fixed income, according to a BetaShares report.
The industry grew by 17 per cent in the first half, and 6 per cent during the second quarter, the BetaShares’ Global ETF Review Q2 2019 found, with the primary allocation moves coming from continued heavy investment in fixed income.
The report expects that global ETF assets under management will expand at a significantly faster rate than its prior 20 per cent average annual growth, given the industry has already reached 17 per cent growth in the first half.
Fixed income received record flows from investors in the first half, taking in $56.4 billion (US$39 billion) or 61.2 per cent share of flows in the second quarter.
In Australia, the category received around $1.4 billion of new money this year, becoming the category with the highest net inflows as at 30 June.
“Following growing investor caution about the extended bull run in equities, it is not surprising that we are seeing investors move to a decidedly risk-off position in their portfolios,” BetaShares chief executive Alex Vynokur said.
“The growth of the Australian fixed income ETF product range means local investors can achieve targeted and diversified exposure to defend their portfolios against volatility in the sharemarket.”
Passive investments more popular
In the US market, the ETF sector saw a net inflow of $88.2 billion (US$61 billion) while active mutual funds had $20.2 billion (US$14 billion) in outflows.
The Australian industry is still not yet at such a contrast for passive against active management, but BetaShares noted out of total flows into Australian retail funds, ETFs received more than 50 cents.
At a sector level, investors increased equities allocations to yield-oriented utilities, technology and financials, while healthcare exposures saw dramatic outflows, BetaShares said.
Looking at regions, ETFs focused on North America were reported to gain the most.
Gold ETFs on the rise
The BetaShares review observed gold ETFs rose during the second quarter, with the segment in the US gaining $4.3 billion (US$3 billion) during June. Investors were said to seek out assets considered safe havens while the price of gold rallied.
“In Australia, we haven’t seen the same levels of net inflows into Australian gold ETFs as yet and, in fact, we’ve seen net selling as investors have apparently sold for profit taking purporses,” Mr Vynokur said.
“That said, we are definitely seeing increased interest in gold ETFs and think this is going to be a trend worth watching more carefully as the year progresses.”
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].