ETFs make up 2.5% of Australian AUM

Usage of locally-listed exchange traded funds (ETFs) in Australia remains low, accounting for only 2.5% of the $1.6 trillion in total assets under management.

According to a Global Investor Experience survey by Morningstar, ETF usage in Australia was far below that of North America and Europe.

But the survey noted investor interest was ‘growing rapidly’ with more products coming to market and substantial inflows seen from retail investors.

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Financial advisers were starting to recommend ETFs but their preference tended to skew towards managed funds. ETFs also had the tax benefit of being able to take advantage of a capital gains discount for holding an investment for longer than 12 months.

Usage of offshore ETFs remained small as offshore ETF operators had not marketed products to Australia, although platform operators and brokers had begun to offer foreign ETFs to Australian investors.  

To carry out the study, the firm considered publicly-available open-ended funds and used asset-weighted expense ratios to compare fund costs across global markets.

Morningstar said: “The varying levels of ETF usage among individual investors in different markets can be attributed to a number of factors. These include market maturity, ease of access to the funds, differences in advice models, and tax considerations, among other factors.

“We believe that vibrant ETF markets can put fee pressure on open-end products and are therefore investigating the role of ETFs in the various markets to set the stage for future study.”

The study also found that Australia was one of the most ‘investor-friendly’ countries for fees and expenses, alongside the Netherland and United States.

 




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