Ilan Israelstam

The ETF industry’s flows in 2022 were “the most concentrated on record”, according to data from BetaShares, with the top two issuers receiving around 90 per cent of the industry net inflows.

The product provider’s Australian ETF Review for 2022 noted the contrast compared to 2021, which saw the top two issuers combine for 62 per cent of total inflows.

Vanguard continues to dominate the sector with 57 per cent of all inflows (around $7.6 billion), followed by BetaShares with just under 33 per cent.

“With the number of participants in the industry now at 42, its notable that concentration levels are actually rising, rather than falling – illustrating the importance of scale in the industry,” BetaShares chief commercial officer Ilan Israelstam said in the report.

The five largest providers by outflows were active managers, led by $4 billion of net outflows by troubled fund manager Magellan.

It was also the biggest year on record for new product development, with 52 new exchange-traded funds launched on Australian exchanges in 2022, compared to 33 in the previous years.

Net product growth was 39 funds, however, with 13 products having closed. This included three crypto-related funds from Cosmos: crypto mining DIGA, and funds that tracked Bitcoin and Ethereum; and two funds from 3iQ CoinShares that also traded Bitcoin and Ether.

In total, the Australian ETF industry received $13.5 billion of net inflows in a year where the unlisted funds industry had its worst year on record with net outflows of $26.8 billion.

“In a highly turbulent year in financial markets, the ETF industry continued to take in new money from investors, even as asset values declined, making it one of the few bright spots in a very hard year for the broader asset management industry,” Israelstam said.

The largest fund by market cap was the Vanguard Australian Shares Index, which held $11.8 billion, followed by the Magellan Global Fund which held $7.5 billion.

When it came to overall sectors, Australian equities held $4.4 billion of net inflows, followed by fixed income ($3.6 billion) and global equities ($3.3 billion).

Passive tops active

Index huggers received $16 billion of inflows, while active ETFs had $2.5 billion in net outflows.

“This trend is particularly striking given the large number of active ETF launches with the actual flow activity seemingly not dissuading managers from launching active ETF classes of their unlisted funds,” Israelstam said in the report.