Stockmarket plunge hits ETFs but trading volumes surge

16 March 2020

Funds under management in the Australian ETF industry fell by $2 billion during February to $64 billion after a fall in asset values caused by the plunging stockmarkets, according to BetaShares.

Global stockmarkets have been falling in recent weeks from the COVID-19 virus which had become a worldwide pandemic.

This was the first time the Australian ETF industry had contracted in more than a year. BetaShares said the decline in funds under management was ‘due entirely to falls in asset values’ rather than outflows.

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In fact, trading values reached a monthly record with more than $7 billion traded for the first time as investors sought liquidity of ETFs during volatile times.

Global equities received the most inflows during February at $935 million, three times the next largest asset class which was fixed income at $306 million.

The top performer for the month was Palladium, followed by BetaShares’ Strong Bear Hedge Fund Products, BBUS (US Equities) and BBOZ (Australian Equities), both of which produced gains of more than 20% as equity markets fell.

Investors were particularly keen on short equity funds with the average daily trading volume in all three funds (BBOZ, BBUS and BEAR) between 24 February and 11 March being 10x or more the average daily trading volume in 2019.

Alex Vynokur, chief executive of BetaShares, said: “At various times in the past, concerns have been raised that ETFs have not been tested in rapidly falling markets. In our view, the fact that ETFs have delivered liquidity and efficiency in this ‘real life’ test of extraordinary volatility puts those doubts to rest.

“The increase in trading volumes in our suite of ‘short’ equity funds indicates that investors are finding these vehicles a liquid and convenient vehicle to express their bearish views.”

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