The Australian exchange traded product (ETP) industry will see an increasing number of millennial users, a substantial growth in the number of active exchange traded managed funds, and a broader range of smart beta options.
Such was the prediction from ETP manager, BetaShares, which referred to a Deloitte report to note millennials preferred self-directed investments and expected efficient technological platforms that allowed them to access investments quickly through the investment cycle.
BetaShares managing director, Alex Vynokur, referred to growth trends in the US, and said this could be replicated in Australia.
According to Schwab's 2015 ETF (exchange traded fund) Investor Study, 41 per cent of millennials used ETFs, compared with 25 per cent of the Gen X cohort, and 17 per cent of baby boomers. Meanwhile, 70 per cent of millennials saw ETFs as a core investment type in their portfolio.
"The US trend towards ETF providers developing ETF model portfolios with automated distribution solutions could also play out in Australia — which would continue to empower millennials with innovative wealth management tools," Vynokur said.
Vynokur also said ETFs had evolved from market capitalisation index trackers to investment strategies that met more investor needs.
"Smart beta products — or those not weighted based on the market capitalisation of their constituents — will be a product segment to watch in 2017 as more investors and advisers alike recognise the potential for these products to offer active-like returns for index-like costs," Vynokur said.
So far in 2016, the ETP industry has grown from $21 billion to around $25 billion in funds under management (FUM) in 2016 so far, with 40 new funds launched, bringing the total number of products in Australia to 199. Vynokur said the ETF industry would end 2017 with $30 billion to $33 billion and around 250 ETPs.