- The number of investors in exchange traded funds (ETFs) has surged dramatically over the past year to over 146,000, according to the findings of the BetaShares/Investment Trends ETF Report released today. Investor numbers have increased 46% in the 12 months to October 2014, up from 103,000 in the previous corresponding period, the fastest growth seen in the last four years.
The BetaShares/Investment Trends ETF Report is a leading comprehensive quantitative and qualitative research study of Australian ETF users available to the market, based on responses of 10,530 investors and 768 advisers on their experiences and usage of ETFs.
Of the estimated 146,000 ETF investors, 63,000 investors held ETFs through SMSFs (43%), illustrating the continued importance of this investor class in driving industry growth. The key reasons for self-directed investors to use ETFs are diversification and access to overseas markets, highlighting the value investors see in utilising ETFs as an access vehicle. Low cost was the most important driver of investment in ETFs for advisers.
“The ETF industry experienced record growth in 2014, and the increased use of ETFs in investor portfolios, and particularly amongst financial advisers, suggests that ETFs are gaining much wider adoption in Australia”, said Alex Vynokur, Managing Director at BetaShares. “The increased use of ETFs is set to continue with the predicted number of investors to hit 184,000 by the end of the year.”
ETF reinvestment levels are increasing
Among those who had already invested in ETFs, satisfaction with investment outcomes was high. Approximately 80% of current investors were considering reinvesting in ETFs over the next 12 months. In addition, the survey responses suggested that most investors intended to double their allocation to ETFs over time.
“It’s pleasing to see that many investors are discovering the diverse benefits that ETFs provide in terms of cost, transparency and access,” said Mr Vynokur. “They are then growing more confident of the outcomes they can expect from ETFs, and seeking to broaden their allocations.”
Advisers’ usage of ETFs continue to surge upwards
Mirroring the growth in usage by individual investors, adviser usage of ETFs grew from 33% to 40% of advisers – the highest level to date. However, while 43,000 new ETF investors joined the market in 2013, the percentage of investors who said their adviser played a role in this investment was steady at 27%, the same as last year’s figure – indicating significant opportunities remain for advisers to be involved in recommending ETF investments.
ETFs poised for further growth
After reaching a record high of $15 billion in funds under management at the end of 2014, this year looks set to be equally strong for ETF growth. A record 84,000 non-ETF investors plan to invest in ETFs in the next 12 months, while 146,000 (50%) current ETF investors also plan to make an additional investment in ETFs in 2015.
For those who don’t invest in ETFs currently, lack of knowledge about ETFs and how to use them in a portfolio remained the two most common reasons stopping investors from using ETFs, indicating an opportunity for advisers and ETF providers to work together to educate investors on the value of ETFs in portfolios.
“The Australian ETF market continues to mature and we expect to see ETF usage continue to grow. Based on the historic growth rate, we predict assets under management to be in the range of $21–23 billion by the end of 2015,” Mr Vynokur concluded.