Strategic beta ETP shows solid growth despite falling AUD: Morningstar
Australia's strategic beta exchange-traded product (ETP) market is on the rise despite the weakness of the Australian dollar, research revealed.
Morningstar's report, ‘A Global Guide to Strategic-Beta Exchange-Traded Products', found the strategic beta market was a fast-growing class of investment products on the active-to-passive investment spectrum, with seven strategic ETPs launching in Australia over last 12 months, as of June 30 this year.
According to the report, Australian strategic beta ETP assets grew by a modest 6.1 per cent in US dollar terms over the last 12 months, however measured in local currency, growth remained rapid at 30.2 per cent. With a total of 124 ETPs now in Australia, 16 of them are classified as strategic beta.
These 16 account for $1.2 billion, which is 8.2 per cent of Australia's $14.1 billion ETP market which, according to the report, continues to be a major factor in strategic beta's growth.
Morningstar's director of global exchange-traded fund research, Ben Johnson, said as strategic beta strategies continue to proliferate and become "increasingly nuanced", investors' due diligence burden will grow "commensurately".
"The strategic beta landscape is growing faster than both the broader ETP market as well as the global asset management industry, driven by new inflows, new product launches, and the entrance of new providers during the past year," Johnson said.
"Benchmarks underlying new products are more complex as well."
The report found the majority of Australian strategic beta ETPs continued to be invested primarily in domestic equities, despite the number of global equities vehicles increasing from one to five over the past year.
Recommended for you
Infrastructure assets are well-positioned to hedge against global uncertainty and can enhance the diversification of traditional portfolios with their evergreen characteristics, an investment chief believes.
Volatility in US markets means currency is becoming a critical decision factor in Australian investors’ ETF selection this year.
Clime Investment Management is overhauling the selection process for its APLs, with managing director Michael Baragwanath describing the threat of a product failure affecting clients as “pure nightmare fuel”.
Global X will expand its ETF range of exchange-traded funds next month with a low-cost Australian equity product as it chases ambitions of becoming a top issuer of ETFs in Australia.
