Aussie ETF market at $27.2b
The Australian exchange traded fund (ETF) market has more than doubled its size since 2014, according to Stockspot.
Stockspot’s 2017 ETF report that analysed over 150 ASX-listed ETFs, found the Australian market had grown 28 per cent over the year to $27.2 billion in funds under management (FUM). The largest inflows were from global shares ETFs at $2 billion and Australian share ETFs at $1.5 billion.
The report found Vanguard had continued its dominance with a 42 per cent increase in FUM to $2 billion. This accounted for over a quarter of the Australian ETF market, and almost doubled iShares and BetaShares. Vanguard also retained the lowest average fees at 0.24 per cent.
Globally, the ETF market grew to over US$4 trillion ($5.3 trillion) and Stockspot said it expected the Australian market to quickly expand as ETFs played a larger role in wealth management, replacing direct shares and active managed funds as the preferred way for most people to invest.
The report found Australian share ETFs returned eight per cent over five years, compared to the global share ETF that returned 13 per cent. It said the underperformance of the local market prompted many Australian investors to add global ETFs to their portfolios.
Stockspot chief executive, Chris Brycki, said ETFs would continue to be the success story of the investment industry as investors looked to add better diversification at a low cost into their portfolios.
“Despite only 36 ETFs earning our highest rating of five spots, the reality is that many more of them are likely to outperform the average actively managed funds across the cycle due to their lower cost,” he said.
However, Brycki warned that it was important investors understood that smart beta ETFs took active bets on certain market factors beating others.
“We would encourage investors to look through the latest investment fads when deciding how to invest. Some of the most heavily marketed assets, funds and sectors were amongst the worst performing in 2016/17,” he said.
“Investors should have a healthy scepticism towards any investment product that comes with a slick sounding story and higher fees. The less you pay in fees, the more is leftover in the investor's pocket.”
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