Active ETFs report ‘stark’ $1bn outflows during 2023
Active exchange-traded funds (ETFs) recorded approximately $1 billion in outflows last year, Global X ETFs reports.
According to the ETF provider, the significant outflows were despite active ETFs making up 55 per cent of new fund launches in 2023.
The $1 billion outflows were primarily attributed to the Magellan Global Fund (Open Class) (Managed Fund), which reported a significant $2.5 billion in outflows.
“This is in stark contrast to other areas of the world, like the US where active ETFs made up a quarter of the net flows and a staggering 81 per cent of new launches.
“Active ETFs entering the Australian market have not gained the same level of resonance among local investors,” Global X stated.
“Considering the widespread underperformance of the majority of active managers and their low levels of persistence, the trend towards passive investing through low-cost vehicles like ETFs is likely to continue for many years to come.”
The following ETFs were recorded as seeing the highest outflows, as of 31 December 2023:
| Fund name | 1-year net flows |
| Magellan Global Fund - Open Class Units (Managed Fund) | -$2.5 billion |
| Vanguard Global Value Equity Active ETF (Managed Fund) | -$272.3 million |
| iShares Europe ETF | -$265 million |
| Hyperion Global Growth Companies Fund (Managed Fund) | -$264 million |
| AllianceBernstein Managed Volatility Equities Fund | -$221.1 million |
Source: Cboe
Clean energy ETFs also struggle
According to Global X, funds in the energy transition and clean energy space were the “poorest performers” in the market last year.
“[These products were] weighed down by higher interest rates which impacted borrowing costs given their long project timelines and higher reliance on debt.
“Palladium, used primarily in car exhausts to scrub pollutants from fumes, experienced a further decline due to the ongoing rise of electric vehicles, which do not rely on the metal.”
As of 31 December 2023, these were the worst performing ETFs:
| Fund name | 1-year total return |
| Global X Ultra Short Nasdaq 100 Hedge Fund | -64 per cent |
| Global X Physical Palladium | -38.1 per cent |
| Betashares US Equities Strong Bear Hedge Fund | -36.2 per cent |
| Global X Hydrogen ETF | -21.6 per cent |
| Global X Green Metal Miners ETF | -21.2 per cent |
Source: Bloomberg
Across 2023, the broader ETF industry ended the year with $177.5 billion in funds under management (FUM) and reported growth of $43.7 billion, according to Betashares.
The ETF provider’s annual report said two-thirds of the FUM came from market appreciation, with the remainder deriving from investor inflows and unlisted fund conversion activity.
AUTHOR
Jasmine Siljic
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