Rapid ETF growth set to continue

Australian investors will continue to flock to exchange traded funds (ETFs) over the next twelve months, new research reveals.

Data from the annual BetaShares/Investment Trends ETF Report revealed that the number of investors using ETFs jumped 37 per cent in 2015, exceeding previous forecasts.

BetaShares managing director, Alex Vynokur said ETFs were becoming mainstream in Australia, "just like they are in global markets", with the report predicting that more than 256,000 Australians will hold an ETF by the end of 2016.

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The report, based on a survey of 9,418 investors and 676 financial advisers, found more than 40 per cent of ETF investors held the products in self-managed superannuation funds (SMSFs), while the number of financial planners using ETFs has continued to increase.

The statistics said 44 per cent of advisers already use ETFs, and a further 20 per cent saying they intend on using them over the next year, noting low-cost as the main reason planners for recommendation.

Vynokur said, "last year was a watershed for the industry in Australia, and…this fast growth should continue."

The report also highlighted strong planner demand for exchanged traded actively managed funds, and how this was an unmet opportunity for industry growth over the next year, noting 61 per cent of planners were interested in using such products.

The report said, the main reason for ETF investment was diversification in SMSFs. The secondary reason for investment was access to overseas markets, which has overtaken low cost as a reason to invest.

Vynokur said, ETFs not only provided investors benefits like diversification, transparency and access, but they were becoming more sophisticated, with increasing defensive and managed risk exposures.

The report found repeat ETF investment was ‘very high'; with 71 per cent of investors saying they would consider re-investing in the products over the next year.

It also said, 59 per cent of investors buy ETFs outside of SMSFs, and this too was also expected to grow.

Meanwhile, the majority of ETFs investors used cash holdings to buy into ETFs, rather than using funds from other investments,

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