Fixed income and cash ETF inflows see 46% surge
Flows into cash and fixed income ETFs rose by 46 per cent in October with investors demonstrating a preference for Australian credit ETFs as they move away from AT1 bank hybrids.
The monthly Betashares ETF report found flows into these cash and fixed income ETFs stood at $1.22 billion in September but had risen to $1.79 billion by the following month.
This represented 30 per cent of total monthly inflows, up from 24 per cent in September.
Broken down by sub-category, Australian bond ETFs gained $994 million, cash gained $409 million and global bond ETFs gained $377 million.
Among popular funds to see inflows during the month included Betashares Australian High Interest Cash ETF which gained $298 million, Vanguard Global Aggregate Bond Index (Hedged) ETF which gained $220 million and the VanEck Australian Subordinated Debt ETF which saw inflows of $209 million.
While fixed income and cash ETFs saw inflows rise, they still remain in third place behind international equities which gained $1.94 billion and Australian equities which gained $1.45 billion.
During October, BlackRock launched the iShares Core Global Aggregate Bond (AUD Hedged) ETF (AGGG) which invests in investment-grade global bonds, including government, securitised, and investment-grade corporate bonds across multiple regions.
Meanwhile, PIMCO launched the Short Term Active Yield Active ETF (EARN), designed to provide an alternative to cash and term deposits by investing in a portfolio of investment grade bonds. This was the fifth fixed income active ETF from PIMCO, having launched four in February.
Total ETF inflows during the month stood at $5.99 billion which was a new record for the industry to bring total funds under management to $321 billion. Betashares said this was only the third-ever month when inflows had stood higher than $5 billion.
Vanguard Australian Shares Index ETF retained its hold as the largest ETF at $22.6 billion with inflows of $329 million during the month.
Monthly commentary from Global X ETFs also noted Australian credit ETFs remained a key focus for inflows in the wake of hybrid securities rolling off with the sector seeing the highest-ever monthly inflows of $526 million.
“The Australian Credit ETF category recorded its highest-ever monthly net flows of $526 million last month, marking positive net inflows in 39 of the past 40 months, with at least $300 million entering the segment each month over the past six months. This consistent growth reflects investors’ renewed appetite for defensive, income-generating assets as yields remain elevated, and cash alternatives begin to lose their appeal.
“One key structural shift reshaping the landscape is the gradual phase-out of bank hybrid securities by 2032, following regulatory changes from APRA.
“Investors have shown a clear preference for low-duration, floating-rate exposures that sit lower in the capital structure yet still offer robust yields. However, as issuance increases, spreads may compress, potentially limiting future upside as a standalone investment.”
AUTHOR
Laura Dew
Recommended for you
First Sentier has announced it will transition the Stewart Investors investment management responsibilities to its affiliate investment team in light of three senior portfolio manager exits.
The $365 billion UK fund manager Royal London Asset Management is to launch two funds in Australia by the end of November as it seeks to build an international presence.
With ETF pricing becoming more competitive than ever, those active ETF vehicles priced higher than 120bps are the only segment of the popular product to see outflows.
Income Asset Management has promoted former ASIC commissioner, Danielle Press, as chair of its board following the retirement of John Nantes.
