The sharemarket appreciation and growing net flows helped the Australian exchange traded fund (ETF) industry deliver a strong growth in May, while the listed investments companies (LIC) sector saw a period of stagnation, according to BetaShares’ Australian ETF Review.
The data showed that the industry ended May 2021 at a fresh all-time high of $111.7 billion total market cap, growing by around 3% month on month (+$2.9 billion). Following this, over the last 12 months there had been a 75% of industry growth which represented absolute growth of $47.7 billion over this period, the highest dollar value increase over 12 months in the industry’s history.
In May, the growth was split evenly between net new money into the industry (52% of monthly growth) and asset value appreciation (48% of monthly growth) and this month saw a particularly large spike relatively in international equities products, the report said.
At the same time, outflows were limited this month, with the most notable outflow movement being a large institutional redemption out of a broad Australian equities product.
The report also noted that since the launch of the first Australian ETF in 2001, the Australian ETF industry grew at four times the rate of the LIC industry and since the abolition of commissions paid to brokers by LIC sponsors in May 2020, there was a net growth of Australian ETF products of 21 vs. net reduction in Australian LICs of 10 products.
“The Australian investment public are clearly ‘voting with their feet’ in terms of choice of investment structure and the lethargic growth of the LIC industry appears very much tied to the change in broker remuneration, in our view,” the report said.