ETFs have passed the “real-life test of extraordinary volatility” as markets tumbled amid the coronavirus rout.
After 14 solid months, the Australian ETF industry saw a month of negative growth, with funds under management falling $2 billion, according to the BetaShares Australian ETF Review for February. But inflows remained strong at $1.6 billion, with the fall entirely attributable to asset value declines as markets tumbled in the last week of the month.
“While many investors’ portfolios clearly have suffered from recent falls in equity prices, it is notable that ETFs have performed as expected during a very challenging period,” said BetaShares CEO Alex Vynokur.
“At various times in the past, concerns have been raised that ETFs have not been tested in rapidly falling markets. In our view, the fact that ETFs have delivered liquidity and efficiency in this ‘real life’ test of extraordinary volatility puts those doubts to rest.”
Global equities continue to receive the largest levels of inflows – $935 million – with fixed income taking second place with $306 million. Broad Australian and Asian equities were sold off, with investors appearing to view the US market as “more able to weather the current economic storm”.
BetaShares’ three “short” equity funds have also seen increases in trading volumes since the market rout began, with average daily trading volume and average daily number of trades 10 times that seen in 2019.
“With bearish market sentiment coming to the fore, many investors are looking to protect their portfolios, or to profit from market falls,” Mr Vynokur said.
“The increase in trading volumes in our suite of ‘short’ equity funds indicates that investors are finding these vehicles a liquid and convenient vehicle to express their bearish views.”
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