Fixed income continues to drive ETF industry

26 July 2019

The global exchange traded fund (ETF) industry has reached high of US$5.6 trillion thanks to investors still showing high interest in fixed income, according to BetaShares’ Global ETF Review Q2 2019.

The industry continued its upward trend and grew six per cent during the second quarter as the primary allocation moves came from continued heavy investment in fixed income and with a slight growth in equity inflows.

Fixed income saw record flows during the first six months of the year, taking in US$39 billion, the report found.

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According to BetaShares’ chief executive, Alex Vynokur, the Australian market mirrored the global trend and saw fixed income category receive nearly AU$1.4 billion, becoming the number one category for net inflows as at the end of June, 2019.

“Following growing investor caution about the extended bull run in equities, it is not surprising that we are seeing investors move to a decidedly risk-off position in their portfolios,” he said.

“The growth of the Australian fixed income ETF product range means local investors can achieve targeted and diversified exposure to defend against volatility in the share market.”

As far as the sectors were concerned, Q2 saw investors increase equities allocations to yield- oriented utilities, tech and financials. At the same time, healthcare exposures saw dramatic outflows.

The study also found that even though the Australian industry was still far away from striking levels of inflows versus outflows, in 2018 out of total flows into Australian retail funds, Australian ETFs received more than 50c out of every dollar invested.

“In Australia, we haven’t seen the same levels of net inflows into Australian gold ETFs as yet, and, in fact, we’ve seen net selling as investors have apparently sold for profit taking purposes. That said, we are definitely seeing increased interest in gold ETFs and think this is going to be a trend worth watching more carefully as the year progresses,” Vynokur added.

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