Australians’ savings invested in exchange-traded funds (ETFs) has approached $40 billion, according to Vanguard’s June Quarter 2018 ETF Report, with a $10 billion funds under management (FUM) increase in ASX-listed ETFs from the year’s end to June, 2018.
In June quarter, the Australian ETF industry also attracted $1.1 billion in new cash flows, with funds under management growing by $2.5 billion as the market was approaching $40 billion.
The sector has also diversified further into global equity ETFs, with the asset class attracting more than half of all ETF cash flows over the quarter, while fixed-income products collected around 25 per cent of total cash flows over the quarter.
Additionally, Vanguard continued to see strong cash flows, attracting 40 per cent of total ETF cash flows year to date, it said.
Vanguard’s head of ETF Capital Markets, Damien Sherman, stressed that the robust growth of ETFs led some commentators to suggest that ETFs had a negative impact on investment markets although there was no evidence of them causing any disruptions to the underlying securities markets.
“What we have seen is ETFs serving to democratise investing, allowing investors access to markets and sectors previously out of reach and, as the market has grown, competition amongst issuers and increasing trading volumes has driven down the cost to invest, allowing investors to keep more of the returns they earn,” he said.
“Increases in trading volumes encourages market makers to provide more liquidity for ETFs. Greater volumes also increase the chances that individual buyers and sellers will transact with each other which increases competition for ETFs and leads to a reduction in trading spreads.
“Ultimately what this means for investors is further savings when it comes to transaction and trade execution costs.”
Vanguard said its Australian ETFs have surpassed $11 billion in assets under management (AUM), showing an increase of $1 billion over the quarter.