Despite exchange traded funds’ (ETFs) increasing popularity amongst retail investors, assets witnessed slower growth in 2022 than the previous year, rising 4.9% to $123.1 billion.
In Morningstar’s ETF Investor year-end review, the ETF industry recorded tepid asset growth alongside declining net new flows compared to 2021. This was largely due to volatility in global markets leading to more cautious investment behaviour.
However, asset growth was supported by multiple successful new launches in 2022, noted Kongkon Gogoi, senior analyst at Morningstar.
Last year recorded the highest number of new ETF launches in the past decade, with 41 products launched compared to 23 in 2021. Active ETFs were the most common area for product launches, followed by ESG and disruptive technologies.
Moreover, concentration in ETF providers persisted in 2022. Vanguard, BetaShares and iShares dominated the industry when looking at funds under management (FUM). Combined, they comprised nearly 75% of the total Australian ETF assets.
Market leader Vanguard maintained its top position with $41 billion in FUM, followed by BetaShares with $23.8 billion and iShares with $23.7 billion.
Vanguard, BetaShares and VanEck managed over 87% of total net flows in 2022.
Driven by rising interest rates, bond ETFs were the only category which experienced a gain in net inflows, driven by investors who invested some $3.5 billion in the category.
The global trend of ESG-focused investing also continued, albeit at a slower pace. ESG-related ETFs experienced a 50% decline from the previous year, with the category attracting $1.42 billion. Vanguard and BetaShares managed over 60% of total assets in ESG products.
The sustainable ETF products to receive the highest inflows on the market were:
- BetaShares Global Sustainability Leaders ETF;
- iShares Core MSCI World ex Australia ESG Leaders ETF; and
- BetaShares Australian Sustainability Leaders.
“Our view is that careful due diligence before investing remains as critical as ever. Many
strategies focus on specific themes that often only capture the fleeting interest of investors,” the senior analyst identified.
Gogoi recommended investors to avoid fads and drive investment towards long-term and well-diversified options.
