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Volatility and inflation fail to curtail ETF investing

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3 minute read

More Aussies have invested in ETFs over the past 12 months, and existing investors intend to increase their allocations in the coming year.

Around 1.9 million Australians are now invested in ETFs, according to new research from BetaShares and Investment Trends — a 6 per cent increase from the 1.7 million investors seen a year ago.

The 2022 BetaShares Investment Trends ETF Report also found that 1.4 million existing ETF investors are planning to increase their allocation to ETFs over the next year.

The continued growth of the local ETF industry, which received around $12 billion of net inflows in the year to October, comes in stark contrast to unlisted managed funds, which suffered $25 billion in net outflows over the same period.

BetaShares CEO Alex Vynokur said that more Aussie investors have turned to ETFs than ever before during what has been a volatile year for financial markets.

“The key benefits of ETFs — namely convenience, liquidity, transparency, and cost-effectiveness — continue to resonate as more investors allocate greater amounts of their portfolios to ETFs than ever before,” he said.

“In contrast, managed funds have seen record outflows as more investors continue to turn to ETFs as the vehicle of choice for progressing on their financial goals.”

The report found that 32 per cent of ETF investors use the funds as the core of their portfolios, up from only 4 per cent in 2019, and 46 per cent indicated that they were attracted to the ability of ETFs to provide a robust portfolio core.

Portfolio diversification continues to be the top reason for choosing to invest in ETFs, according to 73 per cent of the Aussie investors surveyed.

Australian equities (78 per cent) and global shares (76 per cent) were the top two asset classes for ETF investors, followed by thematic (27 per cent), responsible investments (19 per cent) and Australian property (17 per cent).

“ETF investors have reacted to the post-pandemic market volatility and inflation by allocating to Australian equities over their international counterparts,” explained Mr Vynokur.

“Industry data backs this trend; flows into Australian Equities ETFs have outpaced their international counterparts by ~$1 billion so far this year.”

On the outlook for ETFs over the next 12 months, the report suggested that an additional 230,000 Aussies would invest in ETFs for the first time, bringing the total number of local ETF investors to over 2 million.

“Going into 2023, it appears as though investors are thinking more about overall cost and diversification within their portfolio. With these matters front of mind for investors and their financial advisers, we expect further growth in the adoption of ETFs next year,” Mr Vynokur said. 

“As a result, we expect net flows from investors to exceed $20 billion next year, while industry funds under management is on track to hit $150 billion, up from ~$130 billion today.”

Jon Bragg

Jon Bragg

Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.