The latest BetaShares Australian ETF Review has revealed that the local ETF industry reached a milestone $150 billion in funds under management (FUM) at the end of the financial year.
Growth of $16.3 billion was recorded over the first six months of 2023, including $4.8 billion of net inflows, while the majority of the FUM growth was attributed to market appreciation.
Net inflows were down 20 per cent compared to the first six months of 2022, but BetaShares noted that ETFs appeared to have fared better than unlisted funds, which suffered estimated net outflows of $23.4 billion between January and May this year, according to Morningstar data.
“ETFs continue to cement their place in the portfolios of Australian investors, as they provide convenient and cost-effective exposure to a growing range of asset classes and investment strategies,” commented BetaShares CEO Alex Vynokur.
“This trend has pushed ETFs to $150 billion and is expected to facilitate continued growth for the industry for the foreseeable future.”
Fixed income ETFs received $2.5 billion in net inflows during the first half, the most popular category ahead of Australian equities ($1.6 billion) and cash ($688 million).
International equities, which is usually one of the top categories for investor inflows, instead recorded $94 million of outflows over the period, with BetaShares drawing attention to the cautiousness of investors amid the rising interest rates environment and fears of a recession.
A total $74.6 billion of all investor assets remained in international equities exposures across the ETF industry, with $39 billion in Australian equities and $17.9 billion in fixed income.
Active ETFs recorded net outflows in the half, which BetaShares said was largely due to the $1.4 billion which flowed out of the Magellan Global Fund (MGOC).
A total of 22 new products were launched in the first six months of the year, compared to 23 in the same period last year, with three new issuers entering the market.
The BetaShares Crypto Innovators ETF (CRYP) was the best-performing product overall with a gain of 121.3 per cent, followed by a 100.5 per cent rise for the Global X Ultra Long Nasdaq 100 Hedge Fund (LNAS), and a lift of 84.0 per cent for the Global X 21Shares Bitcoin ETF (EBTC).
In terms of ETF manager inflows during the half, BetaShares was the leader with $1.8 billion followed by Vanguard ($1.5 billion), iShares ($1.1 billion), and VanEck ($1.0 billion). Combined, BetaShares, Vanguard and iShares accounted for approximately 92 per cent of industry flows.
BetaShares reported that the Australian ETF industry has recorded a compound annual growth rate of 43 per cent per annum since its inception in 2001. The firm has forecast that due to ongoing interest from investors, the industry could lift above $160 billion by the end of this year.
“Over the past 20 years, ETFs have allowed investors to improve outcomes right across their portfolio, whether it’s shifting from higher cost unlisted funds, replacing underperforming active managers or improving diversification beyond the selection of single stocks,” said Mr Vynokur.
“The trend shows no sign of slowing as investors use ETFs to add exposure to high-quality investment options across their portfolio.”
