The Australian exchange traded fund (ETF) industry hit an all-time high in 2019, with the highest annual change on record of $21 billion and reaching $61.8 billion in funds under management (FUM), according to BetaShares Australian ETF Review – Year End 2019.
Although asset appreciation was an important component of such a growth, around 60% of the industry growth in 2019 came from net inflows which stood at $12.9 billion. The result was 65% higher when compared to 2017.
Also, last year saw a significantly growing investors’ interest in the fixed income ETFs, where fixed income products ranked number one for net inflows and were consistent with the global trends in 2019.
The $3.7 billion of net inflows into fixed income ETFs was followed closely by around $3.6 billion into international equities products. At the same time, Australian equities ETFs also had a strong year, with around $3.0 billion in net inflows.
“In an unpredictable and low interest rate environment, we’re finding that many investors are seeking out exposures that offer defensive benefits and diversification. This trend has been reflected in strong flows into fixed income throughout 2019, with many investors using ETFs as their vehicle of choice to gain exposure,” BetaShares chief executive, Alex Vynokur, said.
“The strength of inflows, with over $3 billion into three distinct categories, shows that investors are increasingly using ETFs as a convenient and cost-effective way to build diversified portfolios across a range of asset classes”
Additionally, the breakdown of inflows between passive and active products in 2019 remained in line with the last few years, with passive products accounting for 89% of inflows ($11.5 billion), and vanilla index-tracking products remaining the dominant category at 79% ($10.2 billion) of total net flows while ‘smart-beta’ products receiving 10% ($1.4 billion) during the year, the study found.
As far as the outlook for 2020 was concerned, Vynokur said that it was unlikely for the industry to repeat 50% plus growth, however the outlook was still bright, with an expectation that “the ETF industry will end 2020 somewhere in the range of $70-$80 billion”.