ETF investors eschew thematic funds
There has been a “flight to vanilla” when it comes to uptake of exchange traded funds (ETFs) in the past six months, according to ETF Securities.
Issues around market uncertainty, volatility and geopolitical problems had left investors cautious to take riskier bets.
Instead, inflows were concentrated around domestic funds such as Australian equities.
Evan Metcalf, head of product at ETF Securities, said: “There has been a flight to vanilla, products like ASX 200 ETFs, and away from ones with high active share.
“There has been an evolution in how people use ETFs for different exposures and different reasons.”
This had come at the expense of flows into thematic funds which the firm offered in areas such as battery technology, hydrogen, biotech and robotics.
“The flow into thematic ETFs has slowed, people are sitting on the sidelines for thematics and waiting to either buy the dip or take their time to get back in again,” Metcalf said.
“We are finding more advisers are using thematics in their model portfolios though and that shows they can be used in a strategic way rather than just in a tactical way.”
Earlier this month, BetaShares data found Australian equity products received the bulk of inflows in the first six months of 2022, double the volume of those into international equity ETFs, with the Vanguard Australian Index fund taking the most assets “by a substantial margin” at $1.7 billion.
Metcalf also said the ETF Securities’ cryptocurrency offering had seen a more muted uptake than the firm had expected as a result of a dip in cryptocurrency markets.
The ETF Securities Bitcoin ETF was launched in April but it coincided with a downturn in cryptocurrency which meant investors who had previously expressed interest, were less enticed to the strategy.
Metcalf said: “It was launched at an unfortunate time, there were more restrictions than we expected and we found it needed hefty margin requirements which has kept brokers on the sidelines.
“Wealth managers and advisers can’t access it so it is mostly retail investors and, even then, some businesses like nabtrade still won’t offer it.
“So the people who are most bullish on crypto who are those who have already gone directly and have their own wallet. It won’t be until their wallet gets hacked and they want the safety of an ETF that they would look to us.”
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Laura Dew
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