ETF industry grows despite sharemarket stalling

The growth of the Australian exchange-traded fund market continued in August to reach a new record high of $12.4B in assets under management according to the BetaShares Australian ETF Review – August 2014.

Total funds under management increased by around $200 million, the growth particularly striking as it was almost entirely attributable to new money flows during a month in which the Australian share market did not grow at all.

In what has been a recurring theme in the industry , investors continued to be attracted to high yielding Australian equities, with that product sector receiving the highest level of inflows for the month, with the BetaShares Equity Yield Maximiser managed fund (YMAX) receiving the largest amount of inflows in that category. ETFs focusing on broad Australian equities were also well supported.

In a month in which Australian stocks performed in a lacklustre fashion, the exchange traded products which delivered the best returns to investors were those that focused on natural gas and emerging markets equities.

“ETFs provide a convenient way to build sensibly diversified portfolios that include a wide range of asset classes. Their attraction is independent of the fluctuations in the Australian share market. As it happens, though, many ETF investors continue to seek yield – as they have done for much of the last year,” Mr Vynokur said.

Looking ahead, Mr Vynokur noted that that the growth in funds under management was expected to continue. “The recent development of the ETF market suggests that larger numbers of investors are becoming involved, investing money into established products. We expect continued inflows into existing products, however, we additionally expect industry growth to be assisted by new and innovative investment solutions that are anticipated to become available on the ASX through the last four months of 2014.”