The year to 30 September 2016 has been another strong year for growth in Exchange Traded Funds, according to Zenith Investment Partners latest ETF Sector review, with the sector reaching a market capitalisation of $24.1 billion, up 24.7% on the previous year.
Product diversity continued to increase as well, with 146 exchange traded products now on the ASX, up from 128 the previous year (excluding exchange traded bonds).
Senior Investment Analyst at Zenith, Dugald Higgins, said “new ETF strategies have also become available over the past year such as multi-factor, global fixed interest, listed infrastructure and Australian mid-cap equities to name a few. This increasing product set is making global portfolio construction easier and more effective for those focused on building low cost portfolios”.
“Alternative Beta strategies also continue to proliferate the market” said Higgins. As experienced offshore, this segment continues to evolve rapidly. In the sector report Zenith questions if such strategies (and indeed ETFs in general) are market disrupters, or will users embrace these tools as being complementary to existing strategies rather than substitutes?”
Since the launch of the Magellan Global Equities Fund as a listed Managed Fund on the ASX in March 2015, the market has been closely watching this emerging trend. Some are questioning whether or not the move to listed Managed Funds, (which use internal market making functions), renders ASX‟s own mFund platform obsolete.
The counter argument is that mFunds arguably represent a more „pure‟ exposure given they are unaffected by market making activities. Regardless of the outcome, the implications of the trend on the ASX as a platform alternative for many cannot be ignored.
Summary of the Zenith 2016 Exchange Traded Funds (ETF) Sector Review:
From an initial universe of 145 products (taken as at 31 August 2016):
• 3 were rated “Highly Recommended”
• 30 were rated “Recommended”
• 16 were rated “Approved”
• 1 was placed on “Redeem”
• 94 were “Not Rated”
