Entering Australia as an offshore ETF player

Australia’s “sophisticated” financial services industry is a magnet for offshore fund managers, according to a global firm.

Financial advisers are increasingly looking to ETFs as an investment vehicle to meet client interest, with Adviser Ratings previously finding that one-third of advisers are planning to lift their ETF allocation in the next 12 months.

As such, several global asset managers expected to enter the Australian ETF sector this year, to reap the benefits of not only a fruitful financial services industry but also a strong economy.

Namely, last month State Street predicted at least three global asset managers, with FUM of US$100 billion, will enter the local market sometime this year.

This follows a strong 2024 where several new players entered the scene, including Claremont, Investors Mutual Limited, Lazard Asset Management and Monochrome, among others. 

EY recently explained that offshore fund managers tend to enter the Australian ETF arena in one of four ways, including by launching active ETF versions of their existing mutual funds, by acquiring an existing provider, by partnering with a smaller firm, or by converting a mutual fund into an ETF.

Speaking to Money Management, Seoul-headquartered Mirae Asset Global Investments said it opted for the acquisition route having deemed it the “most effective path forward”.

The firm, which entered the scene back in 2022 via the acquisition of Australian-based ETF Securities - later renaming it to Global X – said with the local market predicted to keep growing exponentially over the coming years, it is “well positioned” to support this growth.

Particularly compelling to Mirae Asset are Australia’s “sophisticated financial services industry”, its strong economic fundamentals, and its pension systems.

“Australia is home to one of the largest and fastest growing funds management industries globally, supported by a robust superannuation system and a growing base of long-term investors. Within this environment, ETFs have become an increasingly important part of investor portfolios,” the firm said.

“Having a presence on the ground has enabled Mirae Asset to better understand local investor preferences and participate meaningfully in this momentum by bringing innovative, cost effective, and forward looking solutions to market”.

The attractiveness of Australia as an ETF destination was earlier confirmed by Tim West, UK ETF leader at EY, who said: “Australia’s leadership in low-cost investments means its investors (both institutional and retail) are attracted to the ETF construct, with a lot of flow in Australia going to low-cost trackers.” 

As for the success offshore players are enjoying locally, speaking to Money Management last week Matthew Watts, partner in asset management and investment funds at K&L Gates explained that overseas players tend to perform well given their extensive background knowledge of the asset class. 

“What we’re seeing is that it is a lot easier for offshore managers, particularly the US managers, to enter the Australian market, because they’re familiar with ETFs and their market is a lot more mature,” he said. 

“They do have that base level knowledge. While the structures are a little bit different, distribution might be different, they have base knowledge around what an ETF is.”

Looking forward, Mirae Asset is focused on “strengthening and deepening our capabilities within these regions”, including Australia. 

“We continue to evaluate strategic opportunities to grow both our investment capabilities and distribution footprint in key markets where we can deliver meaningful value and long-term outcomes for investors,” the firm said, adding that it is also continually keeping an eye on opportunities to expand its global footprint and deliver investment solutions to a broader range of investors.