ETP inflows soar during COVID-19

15 May 2020

The Australian exchange traded product (ETP) industry experienced inflows of over $1.07 billion in April, with half that investment directed at Australian equities, according to VanEck.

April flows to Australian equity ETPs totalled $612.6 million while the S&P/ASX 200 Index rallied 8.78%, which followed $1.03 billion domestic inflows in March.

Over the 12 months to 30 April, assets under management (AUM) in the Australian ETP market rose 28% to $61.06 billion.

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Arian Neiron, VanEck managing director and head of Asia Pacific, said the recent market correction opened up opportunities for investors to buy exchange traded funds (ETFs) at lower prices.

“The healthy inflows illustrate the appeal of ETFs in enabling investors to achieve strategic asset allocations, especially through smart beta ETFs, which have attracted almost one-fifth of ETP inflows this year, or $830.6 million,” Neiron said.

“Australian equities too are very popular, attracting $2.42 billion in net flows over the year to 30 April, or around half of all ETP flows.

“Australian equities have been oversold and local investors and even US hedge funds are looking at oversold assets in this region.”

Investors looked to gold due to market volatility and gold prices had strong gains in April, while flows for commodity ETPs totalled $211.1 million.

The Australian dollar’s volatility also pushed investors into currency hedged ETFs, but unhedged funds remained popular too.

“As we saw in March, when markets correct, the falling Australian dollar lifts returns from unhedged international investments, providing a downside buffer,” Neiron said.

“Now that Australian dollar has recovered a little, we are also seeing greater flows into hedged international equity ETFs.”

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