Fixed income and cash ETFs lead the way

The Australian exchange traded fund (ETF) industry has grown by $10 billion in just two years, while fixed income and cash recorded the fastest growth in the sector, according to boutique investment adviser, Stockspot.

Stockpot founder and chief executive, Chris Brycki, said despite higher volatility in markets, political uncertainty in the US, Brexit and patchy growth in China, the Australian ETF market hit a new high.

The sector grew by $23,971 million (or seven per cent) in the three months to September, he said.

The firm's quarterly ETF report found that fixed income and cash recorded the best growth (14 per cent in the September quarter), followed by Australian shares (strategies) which grew by 11 per cent.

Australian shares (sectors) recorded a minor decline in funds from poorly performing property ETFs, while currency ETF FUM grew by just two per cent, followed by commodity ETFs, which gained four per cent.

Vanguard and iShares continued to dominate the ETF market as issuers, while ANZ, UBS, VanEck Vectors, and Magellan grew at double-digit rates.

The best performing ETF was VanEck Vector's gold miners ETF, which returned 84 per cent year-on-year, followed by BetaShares geared US equity fund currency hedged (hedged fund) which returned 35 per cent.

The recent bounce in commodity prices supported VanEck Vectors resource ETF, while BetaShares geared US equity currency hedged (hedged fund) benefited from currency movements and the US stock markets performance, Brycki said.

The worst performing funds were BetaShares US equities strong currency hedge (hedge fund) and BetaShares Australian strong bear (hedge fund).

"This highlights the danger of owning ‘inverse' ETFs which benefit from market falls. Over the long-run, these products are likely to lose money for investors," Brycki said.

Over the quarter, seven new ETFs were created, five from BetaShares, which would give investors exposure to cyber securities, global healthcare, agriculture, and global banks.