Aussie ETF investors get defensive in March

The Australian ETF industry reached yet another high at the end of March, with total AUM reaching $10.7bn. Cash flows for the month were a solid $265m, bringing YTD flows to $685m. Most significantly, this was around 40% more than that received in the first 3 months of 2013, with no signs of this slowing for the remainder of the year. The global Industry also grew strongly during March with total AUM now at $2.45trillion.

In a reversal on previous periods, March saw Australian investors seek more defensive investments of fixed income and cash, with Australian equities largely out of favour and signalling concern over local growth prospects. This is in contrast  to global ETF investors who sought out opportunities in value based equities over fixed income and cash. Interest in international equity based ETFs did not waiver however, with the category taking our first prize for investor interest during the month.

Amanda Skelly, head of SPDR ETFs, Australia, points to 5 reasons why the trend to international investing is set to continue:

1. Strong investment case for investing offshore, including low correlations to the local market, a continued high Australian dollar and a domestic market weighted down by below trend economic growth
2. SMSF investor concern over exposure to financials and materials which represent more than half of the Australian market
3. Ease of trading and low cost associated with the growing range of international equity ETFs now available on the ASX
4. Broader adoption of ETFs by Australian based investors, particularly within the adviser space who are active in seeking broader diversification across the portfolio
5. Strong performance of overseas markets over 2013