The Australian exchange-traded fund (ETF) industry’s market capitalisation has reached a new high of $247 billion, according to new research from VanEck, following growth of 38 per cent in 2024 and inflows of $35 billion.
The top four issuers – Vanguard, Betashares, iShares and VanEck – accounted for almost 99 per cent (98.8 per cent) of total flows for the year.
In December alone, monthly net flows also hit an all-time high of nearly $4 billion, with the top four accounting for 96.4 per cent of net flows.
Commenting on the data, VanEck said it believes the local market could expand to over $250 billion in the first quarter and top $300 billion by the end of the year.
“Looking ahead, the growth trajectory for ETFs is expected to continue unabated,” the fund manager said on Friday.
“A growing preference for ETFs in Australia has seen fund managers bring more new products to market than in previous years,” it added.
Namely, in 2024, 64 new ETFs launched across ASX and Cboe, bringing the total number of exchange-traded products in Australia to more than 400.
Looking at the most superior returns for the 12 months to 31 December, VanEck’s latest data put Global X 21Shares Bitcoin ETF (EBTC) in first place, with growth of 146 per cent over the year.
Global X’s FANG+ ETF (FANG) followed with a return of 67 per cent.
Interestingly, VanEck and Betashares were the only top-four ETF issuers to have a fund feature in the top 10.
On the other side of the coin, the top four issuers made up the 10 greatest funds by annual net flow, with Vanguard’s Australian Shares Index (VAS) leading the charge, bringing in $2.3 billion in net flows.
International equities steal the spotlight
Throughout 2024, international equities ETFs were largely credited for the lion’s share of net flows, which amounted to more than $15 billion last year. According to VanEck, this is more than double the flows into Australian equities.
“Compared to last year, where flows to international equities ETFs came in third after fixed income and Australian equities, international equities ETFs have been the clear front-runner in 2024,” the firm said.
Australian equities ETFs saw net flows of $7.6 billion, followed by Australian fixed income’s $4.5 billion.
In early 2024, Betashares predicted that, after gravitating to cash and fixed income ETFs in 2023 amid rising interest rates, international equities ETFs would see strong flows from investors as sentiment around growth assets improves.
At the time, research from Betashares found that 53 per cent of ETF investors plan to allocate to international equities in the next 12 months, up from 42 per cent the previous year.
“We continue to see strong adoption of international equities ETFs within investor portfolios, as they better recognise the importance of diversification across asset classes and investment styles,” Betashares chief executive officer Alex Vynokur said.
