Investors warned not to engage in ETF performance chasing
While the exchange traded funds (ETF) market may be booming investors are being warned to not chase market performance as international ETFs have received significant inflows off the back of recent performance.
In a market report, compiled by automated investment adviser and fund manager Stockspot, international share ETFs have overtaken Australian share ETFs as the largest sector in the exchange traded space adding 13 of the 17 new ETFs released in the past year.
At the same time the international share ETFs sector has grown by 95 per cent for the year to $6.9 billion of funds under management, compared with $5.09 billion for Australian share ETFs, with the average international ETF return up 28 per cent over the past 12 months.
Stockspot chief executive, Chris Brycki, said the new funds that have been launched show that investors are attracted to themes that have strong past performance.
However he said that while Australian investors have typically been underweight to international equities and are attempting to correct this they may be moving too late.
"Chasing ETFs that have performed well in the recent past is dangerous because assets which have performed well over the short or medium-term tend to revert to their long term average returns eventually. Investors that chase popular themes are likely to be disappointed when the investments don't do as well longer term," Brycki said.
He pointed out that commodity markets and ETFs across those markets were once very popular but had the weakest performance and slowest growth for the year with the average commodity ETF losing 11 per cent of value for the past 12 months.
Brycki said ETFs had also outperformed managed funds in Australian large-cap shares (by 0.62 per cent), Australian fixed interest (by 1.87 per cent) and international fixed interest (by 0.67 per cent) but had underperformed Australian small-cap shares (by -2.03 per cent) and international large-cap shares (by 0.89 per cent).
AUTHOR
Jason Spits
Recommended for you
The use of active ETFs in model portfolios by financial advisers is a key factor in the growth of the products for iShares, according to BlackRock.
Global asset manager BlackRock has identified bringing private markets to the wealth channel as a key business area for the firm that could generate US$500 million in revenue in the future.
Flows into cash and fixed income ETFs soared in May, rising from $366 million in April to more than $1.3 billion, data from Betashares shows.
Quinbrook Infrastructure Partners has promoted its Australian head to the role of chief executive of the global investment manager.
