Active ETFs report ‘stark’ $1bn outflows during 2023

1 February 2024
| By Jasmine Siljic |
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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.

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