The 6 trends shaping the Aussie ETF landscape
A new EY report highlights six key trends shifting the Australian exchange-traded fund (ETF) industry.
Last month, data from the ASX and Vanguard reported that the Australian ETF assets under management (AUM) broke through the $200 billion mark.
According to EY’s recent report, the market is forecast to reach $230 billion by the end of the 2024 calendar year and could rise by 150 per cent to $500 billion in the next five years.
The paper identified several trends that defined the past six months and the June quarter particularly.
“The most recent industry updates for the Australian ETF industry reveal new market entrants, a new sustainable fund launched after a year, a record-breaking number of active fund launches, resurgence of investor interest in crypto alongside positive performance.”
1. New market entrants
In the first six months of 2024, four new issuers entered the market, EY wrote. These were: Claremont and Investors Mutual Limited with listings on the ASX, alongside Lazard and Monochrome on Cboe.
Despite the new entrants’ debuts, industry concentration in the ETF landscape continues to persist. The top three providers – Vanguard, Betashares and iShares – account for approximately 65 per cent of the market share and received 82.8 per cent of the net flows in the June 2024 quarter.
2. Sustainable funds
“After a year-long wait, a new sustainable fund was launched in April 2024,” the EY report noted.
This was the Russell Investments Sustainable Global Opportunities Complex ETF – the firm’s first global equities ETF in Australia. The product launch brought the total number of listed sustainable funds to 45, which cumulatively hold $111 billion or 5.6 per cent of the FUM by June 2024 quarter.
3. Active funds dominate
The June 2024 quarter witnessed a high volume of fund launches, in which 14 out of the 19 new launches were active ETFs. Despite this, active ETFs only hold 21 per cent in terms of funds under management while there are an increasing number of active ETF closures.
According to Arian Neiron, chief executive and managing director for Asia-Pacific at VanEck, the lack of strong flows into active vehicles demonstrate that product providers shouldn’t just replicate existing unlisted funds and should be a new, attractive offering for advisers.
4. Cryptocurrency surges
Crypto ETFs continue to be a defining trend in the ETF space and consistently rank in the top performing products. For example, the Betashares Crypto Innovators ETF was the highest performer for June 2024 with a one-year return of 68.5 per cent.
“The most recent crypto-focused ETF, the Monochrome Bitcoin ETF, was launched in June 2024 and is listed on Cboe. This brings the total number of crypto ETFs in the market to five.”
5. Equities regain power
EY observed a “distinct shift” in investor sentiment, as international and Australian equities regained their places as the preferred asset classes for ETF investors with $2.7 billion and $1.4 billion in inflows, respectively, during the June quarter.
6. Stagnant fees
Due to longstanding intense fee pressures, the weighted average expense ratio remained unchanged quarter-on-quarter, the report found. The expense ratio for passive ETFs stood at 0.24 per cent, while active ETFs were at 0.75 per cent over the quarter.
AUTHOR
Jasmine Siljic
Recommended for you
Tribeca Investment Partners has made a distribution hire from Australian Ethical in a newly-created role focused on the national intermediary market.
Asset managers may be urged to diversify their product ranges, but investment executives have warned any M&A deal should avoid simply filling gaps and instead consider long-term value creation.
Specialist wealth platform provider Mason Stevens has become the latest target of an acquisition as it enters a binding agreement with a leading Sydney-based private equity firm.
Fund managers are entering 2025 with the most bullish sentiment since August 2021 and record high allocations to US equities, thanks to the incoming Trump administration.
