Vanguard, the largest issuer of exchange traded funds (ETFs) by assets under management, has announced that Vanguard Australia recorded its strongest-ever year in ETF inflows at $5.7 billion in 2020, a 12% growth from 2019.
At the same time, the Australian ETF industry again reached a new high, surpassing $94.6 billion in AUM as at the end of 2020.
Vanguard’s flagship Australian Shares ETF, VAS, continued to see the largest inflows of any product in the market with a total of $2.3 billion in 2020, and $648 million in Q4 alone.
Minh Tieu, head of capital markets for Asia-Pacific, said the unprecedented flows showed how ETFs had grown in in popularity with both retail, advised and institutional investors.
“It is likely that confidence also continues to grow in the resiliency of ETFs. Even in the face of extreme market volatility, ETFs did not experience any trading or liquidity issues in 2020,” Tieu said.
“Last year we saw a wave of new retail investors enter the market for the first time. Along with the cost benefits and flexibility, ETFs allow for greater value transparency, providing investors with real-time pricing via the exchange.
“We also continue to see greater participation year on year from institutional investors, with greater availability of ultra low cost ETFs likely bolstering demand.”
According to Tieu, international equity ETFs were favoured over domestic equity ETFs in Q4 as the market exposure provided by international ETFs was a drawcard for many investors who were looking to diversify away from home-grown companies.
“With international shares, particularly those with exposure to the technology sector, outperforming in the second half of 2020, investors may be seizing the opportunity to capture higher returns. ETFs can be a low cost and efficient gateway to overseas markets where these shares may be more difficult and expensive to purchase individually,” he said.
At the same time, domestic bond ETFs in Q4 drew $753 million in inflows, which was $363 million more than international bond ETFs, suggesting greater investor confidence in local bond markets as economic and political upheaval continued overseas.
