Investors seeking safe havens in ETFs

Investors are still seeking safe havens amid market volatility, with the Australian ETF market attracting $4.3 billion in new cash flows in the quarter of 2019, the highest quarterly cash flows ever recorded, according to Vanguard.

The overall ETF industry saw its assets under management (AUM) grow to $455.9 billion at the end of Q3 which translated into a 32% year-on-year growth.

Vanguard saw 33% of new cash flows in September, with $158m being allocated to the Vanguard Australian Shares Index ETF (VAS), alongside Vanguard All-World ex-US Shares Index ETF (VEU), and Vanguard U.S. Total Market Shares Index ETF (VTS).

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According to head of Vanguard’s equity index group in Asia-Pacific, Duncan Burns, such a result demonstrated a high demand for ETFs from a variety of investors, with no sign of momentum slowing, he said.

“Australian investors have become more focused on diversifying their portfolios, lowering their investment costs and using investment products that are true to label. It’s gratifying to see more and more investors understanding the benefits of ETFs and the low-cost diversification ETFs can offer their investment portfolios,” he said.

Burns also reminded that investors’ portfolios should reflect their tolerance for risk in a variety of market conditions.

“Keeping a long-term perspective is critical and if investors are looking for a way to safe guard their portfolio, one of the best ways is through maintaining maximum diversification across asset classes,” he added.

“Market timing is extremely difficult to execute well, even for professional active money managers. Regardless of what's happening with interest rates and the broader economy, fixed income investments should continue to play an integral role in diversified portfolios”.


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