ETFs favoured despite falling markets

11 October 2019

The Australian exchange traded fund (ETF) industry reached $56.2 billion in funds under management (FUM) in September and is expected to exceed $60 billion by the end of the year, according to BetaShares.

BetaShares’ latest ETF report found over 75% of flows in September came from net inflows at $1.6 billion, and the remainder from market appreciation, indicating that investors had been increasing their ETF allocations regardless of rising and falling equity markets.

Over the last year, the total industry market cap increased by $14.1 billion.

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In terms of allocation, investors favoured domestic exposures in September with inflows of about $500 million into broad Australian equities, and over $250 million into Australian bonds.

BetaShares chief executive, Alex Vynokur, said the increase in ETF investments despite falling equity markets illustrated that investors were using ETFs as building blocks for their long-term core portfolio allocations, independent of market conditions.

“The level of diversification has also been notable this year, with investors allocating more widely into fixed income ETFs, a category that has been previously shunned.,” he said.

“It’s clear that more and more investors are now using ETFs as a convenient and effective means by which to diversify across a range of asset classes and build more balanced portfolios.

“Based on the level of growth we’ve seen so far this year, we believe ETF industry FUM is on track to exceed $60 billion by end 2019, which would mean unprecedented 12-month growth of $20 billion.”

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