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Smart beta ETFs gain traction

Investors are increasing their allocation to smart beta exchange traded fund (ETF) products as opposed to market capitalisation and active strategies, according to the VanEck ETF IQ Scorecard for December, 2018.

Smart beta ETFs were gaining in popularity for Australian equity, international equity and Australian fixed income asset allocations. As a result, smart beta cumulative net flows as a percentage of total flows grew from 11.7 per cent to 21.7 per cent between 2016 and 2018.

“By strategy, smart beta ETFs are gaining in popularity, now accounting for about one quarter of all inflows, at $1.6 billion over YTD [year-to-date], as investors seek targeted investment outcomes and wealth-building strategies offered by traditional ETFs which track market capitalisation indices,” VanEck said in the report.

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At the same time, net flow allocation to active ETP products remained stable at approximately 10 per cent of total flows.

What is more, international equity exchange traded products (ETPs) continued to dominate the landscape of the Australian ETP industry, having attracted the greatest net inflows in 2018, with $3.2 billion compared to $1.7 billion for Australian equities.

This was driven by Australian investors wanting to diversify their portfolio and pursue growth opportunities offshore.

During December investors’ funds flowing to international equity ETPs stood at $196.5 million, followed by Australian equity ETPs ($167.5m) and fixed income products which received $84.8 million.

“With ongoing market volatility expected in 2019, we are likely to see continued healthy flows into defensive ETFs such as fixed income and infrastructure,” VanEck said.




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