ETP industry to reach $48bn by year end

The exchange-traded product (ETP) industry is expected to reach at least $48 billion by year end, according to VanEck’s exchange-traded funds (ETF) IQ scorecard, with the Australian ETP industry attracting $4.49 billion of net inflows.

Additionally, the local ETP industry saw a record month for 2018 with net inflows of $827 million in September.

At the same time, the Australian Securities Exchange (ASX) saw a number of new ETPs listed in September, which included an active ETP and smart beta ETFs across the Asian equity, international equity and international fixed-income asset classes.

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Following this, international equity ETPs were the most popular with $2.4 billion in net inflows and smart beta ETFs were also gaining in popularity for both Australian and international equities and Australian fixed-income exposures.

“Following the rise of US technology stocks such as Amazon, Microsoft, Alphabet, Facebook and Netflix, investors have chased growth and opportunities not available locally, allowing them to build wealth and diversify their portfolios,” VanEck said.

“The bulk of ETFs are passive-based market capitalisation ETFs. But smart beta ETFs are gradually taking greater market share, as are active ETPs. We expect this trend to continue as the ETP market gains sophistication and investors’ appetite for diversification and targeted outcomes grows.”

According to VanEck, the underperformance of Australian equities added to the offshore investment momentum, while the lower Australian dollar boosted returns for unhedged strategies.


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