ETF market to power on to $100 billion level
The exchange traded fund (ETF) sector is in the middle of a five to seven year growth spurt and will likely reach $100 billion in funds under management by 2020 cementing its place as a mainstream investment strategy and product.
According to MSCI vice president ETF Client Coverage in Australia, Tim Bradbury, the ETF sector would continue its recent year on year growth and move from around $16 billion this year to $21 billion next year.
He said this growth in the Australian market had been gathering momentum for the past few years and if it replicated markets overseas would continue to growth at around 40 to 50 per cent per annum.
"Last year the sector grew by around 50 per cent and much of that has been from new assets flowing into ETFs. The forecast is for funds under management to reach $100 billion in the next five years," Bradbury said.
"If we follow other markets we should expect five to seven years of market growth before it flattens out and that would include the addition of new products issuers and products with some expected to launch before the end of the year."
Bradbury said there were currently nine ETF product providers and 105 products in the market at the moment with some local investment firms expected to move into the ETF space later this year.
He said while the growth has mainly come from non-aligned financial planners the sector would pick up noticeably when ETF products made their way onto the approved product lists of aligned-advisory groups.
"When this happens it will be a very powerful push for ETFs though it is not expected that planners will dive right in. They will use one or two initially but as the comfort factor kicks in we can expect increased uptake and growth rates."
Bradbury began his role with MSCI on Monday of this week and was previously managing director at ETF Consulting and ETF Portfolio Solutions, two businesses which he began in 2010.
He said ETF Consulting had been sold to Gateway Financial Marketing, operated by former Macquarie employees Amanda Rethus and Edwina Best, who had been working with Bradbury prior to his move to MSCI. Bradbury said ETF Portfolio Solutions was currently up for sale.
In his new role Bradbury said he would be involved with developing indices for clients, educating the market around the use of ETFs and building the presence of MSCI in Australia.
AUTHOR
Jason Spits
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