BetaShares’ Global ETF Review has revealed 2019 was a strong year for the exchange traded fund (ETF) industry, both globally and locally, with Australia seeing growth of 52% during the 12 months.
According to the study, last year set the record for the global ETF industry with US$6.35 trillion in assets under management (AUM), reflecting rapid year-on-year growth of 32%. At the same time, AUM grew by 11.5% over the final quarter alone.
In Australia the market saw an extraordinary growth of 52% for the year with the industry reaching A$61 billion.
On top of that, the research found that in the US market assets in passive managed funds and index ETFs exceeded those held in active managed funds for the first time in the third quarter of 2019. Also, flows into passive ETFs, which stood at US$312 billion were the second highest on record and accounted for 73% of all inflows into passive investment and was the highest share on record.
“The data shows that the record share of inflows taken by ETFs reflects not just a preference for passive overactive investment approaches, but also a preference for ETFs an investment structure,” BetaShare’s chief executive, Alex Vynokur, said.
Fixed income ETFs accounted for 47% of ETF inflows in 2019, which represented a growth from around 30% of inflows in 2017 and 2018. By comparison, equity ETFs represented 49% of all ETF inflows.
“The increase in interest in fixed income ETFs in the US mirrors what we experienced in Australia in 2019, where, for the first time on record, fixed income products ranked number one for inflows,” Vynokur said.
“In an unpredictable and low interest rate environment, we’re finding that many investors are looking for exposures that offer defensive benefits and diversification – and using ETFs to achieve this.”
As far as the outlook for 2020 was concerned, Vynokur said: “While another year of 30% plus growth globally is ambitious, we expect continued strong inflows across all geographies as investors broaden their use of ETFs across a range of asset classes.”