Australia sees 64% annual growth in strategic-beta ETPs

16 July 2020

Strategic-beta exchange traded products (ETPs) saw growth of 64% in Australia in just one year to US$4.9 billion ($7 billion) thanks to net new inflows of US$1.3 billion in 2019.

According to Morningstar, there were 33 strategic-beta ETPs in Australia, including three that launched during 2019, which represented 14.2% of total Asia-Pacific strategic-beta ETPs.

“Australian strategic-beta ETPs recorded spectacular growth in 2019. Assets increased 64% to US$4.9 billion. This growth rate was higher than that of the overall ETP market and pushed strategic-beta ETPs market share to a new high of 11.4%.

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“The strong growth among strategic-beta ETPs was driven mainly by net new inflows, which amounted to US$1.3 billion. Market performance also provided a lift, as the ASX 200 climbed 23.4% in Australian dollar terms.”

Assets and inflows were second only to Japan which had US$22.8 billion in assets under management and US$3.1 billion in inflows during the year.

The largest Australian vehicles were Vanguard Australian Shares High Yield ETF at US$971 million followed by VanEck Vectors Australian Equal Weight ETF at US$773 million although the average size was US$148 million.

Performance of Vanguard Australian Shares High Yield ETF and VanEck Vectors Australian Equal Weight ETF over one year to 30 June 2020

However, this was dwarfed by the largest Asia-Pacific one which was Next Funds JPX-Nikkei Index 400 ETF, a Japanese ETP at US$7.8 billion.

VanEck was Australia’s top strategic-beta ETP provider with eight vehicles and US$1.8 billion at the end of 2019, a 37% market share. Vanguard was in second place with the aforementioned Australian Share High Yield ETF being its only strategic beta ETP.

VanEck was the seventh-largest provider in Asia-Pacific, a 5.2% market share, and Vanguard was ninth while the largest overall was Japanese firm Nomura which had US$9 billion in assets under management.

However, Morningstar said, fees on these types of products were “significantly higher” than for passive ETPs at an average expense ratio of 0.31% compared to 0.16% for non-strategic beta ETPs.


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