Exchange traded funds (ETFs) have had a “very strong” start to 2013 as people look to rebalance portfolios and increase their global equities exposure, according to Mark Oliver, managing director of BlackRock’s Australian ETF business iShares.
Lower cash rates are driving some of the shift into equities, and about 70 per cent of new ETF inflows in 2013 have gone to global equity products, he said.
Advisers have traditionally looked for core domestic equity exposure from ETFs but there is a growing appreciation of the role international equities can play in portfolios, Mr Oliver told InvestorDaily.
“What’s interesting is that the way advisers are increasingly playing that international space is rather than looking at one big bucket of world ex-Australia, increasingly they’re looking at where the opportunities are within that vast international equity market,” he said.
Adviser demand is resulting in some innovation from providers with demand concentrated so far this year in US equities, emerging market equities and global mega caps, Mr Oliver said.
Long-term investors are starting to focus their attention on countries like Brazil and China, which have fewer macroeconomic headwinds, he added.
“If you look at countries like Japan, Europe and to a lesser extent the US, they’ve got some macroeconomic headwinds [such as] too much debt and ageing populations,” he explained.
“Investors are increasingly recognising the divergence of global markets and global economies and starting to apply their investment dollar in a much more granular way, rather than taking the big bucket approach.”
Contrary to some recent industry commentary, Mr Oliver said investment platforms had made significant progress in recent years when it comes to improving share trading access in response to adviser demand for ETFs and other direct investments.
“Necessity has been the mother of invention there, and platforms have responded well,” he said. “But also we can see advisers starting to use a range of alternative ways to access markets, whether it’s through online brokers [or] through different software systems.”
But in essence, if they can trade shares on the ASX there’s very few hurdles for them and in fact, you have all the benefits of intra-day liquidity and the transparency of an ETF, which is drawing people to the asset class.
