Structural growth continues as the ETF market falls

In a rare occurrence over the last two years, the Australian exchange traded fund (ETF) market contracted during January after a remarkable 20 consecutive months of growth as assets under management dropped slightly to $9.8 billion according to BetaShares’ ETF Review for January.

While assets under management decreased, this drop was wholly attributable to negative market movements, and, in fact, the industry received positive new money inflows for the month of approximately $150 million. Two-thirds of this month’s inflows (approximately $100m) were into Australian equity exposures with a majority of the remaining money going into European equities exposure.

Alex Vynokur, Managing Director of BetaShares said: “Despite the drop in overall funds under management this month, units on issue grew by 1.2% suggesting investor appetite remains buoyant despite recent volatility in the markets.”

Net outflows for January were small with the majority coming from unhedged gold, with investors taking the opportunity to exit as the price of gold increased approximately 7% for the month.

“Products providing commodities exposure were the strongest performing products for the month as the domestic and international bourses across the world took a breather. Despite equity markets being volatile, ETFs provide investors access to other asset classes such as commodities and currencies to develop a diversified portfolio with the potential to outperform across a variety of market conditions,” he said.

One new exchange traded product began trading during January bringing the total number to 90. The product enters a crowded Australian equity high yield segment which received $500 million of inflows in 2013.

“Competing products in a single sector signal a maturing industry, which is beginning to mimic the more developed ETF markets in Europe and the United States,” Mr Vynokur concluded.