ETFs stable despite market volatility
The number of units on issue in the Australian exchange-traded fund (ETF) industry was stable last month, primarily due to new money flowing into several ETFs across a number of asset classes this month, according to BetaShares' Australian ETF Review for May.
While market cap shrunk slightly to $5.2 billion, BetaShares believes the drop can be attributed to market forces, with equity markets down seven per cent during May.
Accordingly, the most popular products for the month were the high interest cash ETFs which attracted just over $20 million in funds, along with high dividend ETFs which, combined, attracted approximately $18 million.
Drew Corbett, head of investment strategy at BetaShares, said it was interesting to note that while there were now even more options available for investors looking for yield, familiar methods such as cash and dividends remained popular.
"The flows for May indicate the volatility in the market has turned investors away from risk assets to yield strategies," he said.
"While bond ETFs can also be used for yield strategies, they are currently being overlooked by investors.
"This will likely change with further education and market penetration," Corbett said.
Corbett also commented that ETF trading values had increased almost 50 per cent, suggesting investors were trading with higher levels of conviction than previously.
"With the increased menu in ETFs outside of equities, the industry is continuing to see investors access different asset classes to diversify portfolios," he said.
"The fact the market did not contract in terms of units outstanding is a testament to the continued investor interest in ETFs across all the asset classes."
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