In Global X’s analysis of the Australian exchange–traded fund (ETF) market’s performance in 2023, Magellan’s Global Fund – Open Class Units (Managed Fund) was revealed as the least popular ETF by net flows.
Namely, according to the firm’s analysis, the ETF’s net outflows hit $2.5 billion, leading last year’s pack of least popular ETFs by a considerable distance.
Vanguard’s Global Value Equity Active ETF (Managed Fund) trailed behind with losses at $272.3 million, while iShares Europe ETF suffered outflows of $265 million.
Among the most popular were “low-cost vanilla ETFs” according Global X, including Vanguard Australian Shares Index ETF with inflows of $1.5 billion, followed by Betashares Australia 200 ETF with $1.1 billion, and iShares Core S&P/ASX 200 ETF with $937.8 million.
Bonds ETFs have been the most popular asset class for investors over the past year, Global X said, attracting $5.5 billion in net flows – or some 37 per cent of the market net flows compared to the prior years’ 25 per cent share.
Cash ETFs also saw significant popularity, garnering nearly $1 billion in net flows as investors were enticed by the prospect of higher interest rates.
Digging deeper into popularity, Global X said that the bulk of net flows continued to pour into index-based products, reflecting investors preference for passive investment strategies.
The firm noted that while active ETFs made up 55 per cent of the new fund launches in 2023, they have seen some $1 billion in net outflows, primarily from the Magellan Global Fund (Open Class) (Managed Fund).
“This is in stark contrast to other areas of the world, like the US where active ETFs made up a quarter of the net flows and a staggering 81 per cent of new launches,” the firm said, adding that active ETFs entering the Australian market have not gained the same level of resonance among local investors.
The firm also said that despite the anticipated market volatility in 2023, which would usually favour active managers, “research indicates that their optimal conditions for outperformance – characterised by low volatility, high correlations, and high stock dispersion – occur only 2 per cent of the time”.
“Considering the widespread underperformance of the majority of active managers and their low levels of persistence, the trend towards passive investing through low-cost vehicles like ETFs is likely to continue for many years to come,” Global X added.
The Australian ETF market grew 33 per cent over the past year to $177.6 billion across 346 products.
Technology ETFs surged while energy transition and clean energy ETFs emerged as the poorest performers.
