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Aussie ETF market approaches $200bn

By Jessica Penny
3 minute read

Growth in the local exchange-traded fund market is aligning with end-of-year expectations, with cryptocurrency ETFs coming out on top for best performance in the last 12 months.

The local ETF market grew 37.9 per cent over the past year to $196.6 billion across 358 products, according to new data from Global X.

This was attributed to more than $18.5 billion in net inflows, positive market movements, and numerous unlisted active funds converting into active ETFs.

Recent estimations have also suggested this could go on to exceed $200 billion by the end of 2024, with the potential to reach $220 billion depending on market conditions.

Global X’s data indicated cryptocurrency ETFs led the charge for best performance in the year to 31 March, on the back spot bitcoin ETFs launching in the US and anticipation for the upcoming bitcoin halving cycle.

Namely, the Global X 21Shares Bitcoin ETF saw a 168.3 per cent one-year total return, with the Betashares Crypto Innovators ETF following closely behind at 161 per cent.

Meanwhile, the energy transition and clean energy ETFs were identified as the poorest performers.

Inverse leveraged exchange-listed funds also lagged over the last 12 months, though Global X said it was not surprised by what it deemed a “typical” underperformance during market upswings.

Turning to net flows, this continued to be dominated by “low-cost vanilla ETFs”, with three of the lowest cost Australian share ETFs – Vanguard Australian Shares Index ETF (VAS), Betashares Australia 200 ETF (A200), and iShares Core S&P/ASX 200 ETF (IOZ) – garnering a total of $4.3 billion in net flows over the past year.

Active ETFs, meanwhile, accounted for the majority of outflows, despite recording the majority of new ETF listings.

In particular, the Magellan Global Fund (Open Class Units) (Managed Fund) (MGOC) continued its streak for largest outflows at a massive $2.2 billion for the past 12 months.

According to the report, global shares “roared” back to start 2024, attracting $6.5 billion in net flows over the past year and $3.1 billion year-to-date in 2024 to become the most popular asset class, while cash ETFs saw “moderated” flows compared to the prior year “as investors are taking a ‘risk-on’ sentiment and seemingly deploying money into growth asset classes in the face of potential interest rate cuts and improving economic conditions”.

Earlier this year, Betashares had also identified VAS, IOZ ,and A200 as the three leading funds for inflows in 2023.

However, in terms of top performers, its chief commercial officer, Ilan Israelstam, noted “a bit of jostling in position year on year amongst the top 10 largest products”.

Namely, MGOC, which came second in 2022, fell to fourth place with a market cap of $6.1 billion and experienced outflows of $2.5 billion through the year.

For the winners, VAS was ranked as the largest ETF in Australia for the second year in a row, with a market cap of $14.4 billion as at the end of 2023.

The Vanguard MSCI Index International Shares ETF (VGS) came in second, with a market cap of $6.5 billion, while the iShares S&P 500 ETF (IVV) followed closely behind with $6.5 billion – both funds jumped up one spot from last year.