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Global market decline takes toll on ETF sector

3 minute read

The Australian ETF industry is worth $6 billion less than it was in August this year.

The funds under management (FUM) of the Australian ETF industry dropped by 1.9 per cent or $2.8 billion during October to a total of $150.1 billion, according to data from Betashares.

In its latest Australian ETF review, Betashares indicated that, similar to September, “robust” inflows in October were not enough to combat a decline in asset values, with falling global share markets causing the industry to decline for the second month in a row.

The local ETF industry is now worth $6 billion less than it was in August this year, when it reached a record $156.1 billion in FUM. But the industry has still grown by 14 per cent or $18.4 billion over the past 12 months.

Betashares reported falling markets failed to dampen ETF demand throughout October, with $1.8 billion of inflows recorded over the month. This was the second highest level of net flows observed so far this year, behind only the month of August.

“This month it was very much broad Australian equities exposures that led investor interest, with ~50 per cent of the month’s flows ($882 million) coming from this asset class. Fixed income remained popular and was the second most popular exposure taking in ~$550 million in new money,” said Betashares chief commercial officer Ilan Israelstam.

“Outflows were low at a category level, with investors taking profits and selling out of short US and Australian equities products, which combined saw $132 million of outflows.”

Elsewhere, ETFs in the categories of international equities ($289 million), cash ($71 million), and listed property ($58 million) also recorded inflows during the month.

“Cryptocurrency exposures were the best performers in October, followed by geared short Australian equities funds which rallied 10 per cent for the month as the Australian sharemarket fell,” said Mr Israelstam.

“With rising geopolitical tension, we also saw gold exposures rise strongly during the month.”

The Global X 21Shares Bitcoin ETF (EBTC) delivered a return of 29.8 per cent, ahead of the Betashares Australian Strong Bear (Hedge Fund) (BBOZ), which gained 10.0 per cent, and the Global X 21Shares Ethereum ETF (EETH), which lifted 9.1 per cent.

The VanEck Gold Bullion ETF (NUGG) and Global X Physical Gold (GOLD) were both up by 8.8 per cent over the month.

ASX trading value was reported to have increased by roughly 10 per cent in October to approximately $10 billion. Only one new product was listed during the month: a currency hedged version of Betashares’ FTSE 100 ETF.

Meanwhile, two products were shuttered in October, including the Perpetual Global Innovation Share Fund (Managed Fund) (IDEA) and one XTB exposure ahead of the closure of the entire XTB range in December.

As a result, 349 exchange traded products were trading on the ASX and Cboe in October.

Product launches have ramped up again in November, with new ETFs being introduced by Dimensional Fund Advisors, Betashares, VanEck, and Hejaz Group.

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.