The Australian ETF industry has reached a new milestone, attracting a record $12.7 billion in investor inflows during the September quarter and propelling total year-to-date inflows to an impressive $23.3 billion, according to new data from Vanguard.
This surge is set to eclipse the previous annual record of $23.6 billion established in 2021, as investors increasingly gravitate towards index-tracking ETFs, which now represent over 91 per cent of total assets in the sector.
Namely, ASX-listed international equity ETFs, primarily index-tracking funds, have accounted for 60 per cent of flows in Q3.
“The appetite for international equity ETFs by investors is not subsiding and continues to outpace the inflows into Australian equity ETFs and other industry segments,” said Adam DeSanctis, Vanguard’s head of ETF capital markets, Asia-Pacific.
As investors continue to target the strong growth experienced in US share markets and, to a lesser extent, other offshore markets, $7.7 billion of investor cash was directed into international equity ETFs over the September quarter.
In a separate report, which also looked at the ETF industry but collating both ASX and Cboe data, Betashares noted that international equities ETFs have tripled the amount of net flows of the second placed fixed income products.
Moreover, the firm said that Australia’s year-to-date flows outpacing previous years is part of a global trend.
“The Australian experience mirrors the overseas trend, with 2024 looking likely to be a record year for the global ETF industry more broadly,” Betashares said.
Locally, the ETF industry rose by 3 per cent in September, with market cap increasing by $6.7 billion. Total industry assets now stand at $226.9 billion – a new record high.
What asset classes are leading the ETF industry’s growth?
The value of Australia’s ETF industry has risen by more than $46.6 billion since the start of this year, Vanguard highlighted, fuelled by the combination of strong investor inflows and global share market gains.
While international equity ETFs have continued to take up the lion’s share of new investor dollars, some $2.1 billion flowed into Australian equity ETFs over the last three months, amounting to $5 billion in 2024.
Moreover, inflows into Australian fixed income ETFs accelerated over the third quarter – drawing in $1.49 billion – as investors targeted bond funds to lock in relatively higher income levels.
This was up from $601 million over the June quarter and $694 million in the March quarter.
On the other side of the coin, international fixed income has only received a fraction of this, totalling $839 million in cash flows this year.
The only asset classes to remain in negative territory year-round have been currency and Australian property ETFs, seeing $14 million and $82 million in outflows, respectively.
Interestingly, cash ETFs saw outflows in the first two quarters of 2024 but rebounded in Q3, attracting $152 million in investor dollars.
According to data from VanEck last week, Chinese equities were the “Cinderella story” for September’s ETF market growth, going from one of the worst-performing equity markets to finishing the month on a high.
China’s equity market benchmark surged 21.1 per cent for the month in the space of just a few days, according to VanEck, marking its strongest move since 2014.
