The Australian exchange traded fund (ETF) market continued its rapid growth over the first half of the year according to the BetaShares Australian ETF Review – Half Year 2015, with ETF market capitalisation growing by $3.4 billion (23%) to reach a new record high of $18.4 billion at the end of the 2014/15 financial year.
Significantly, despite subdued price growth in equities markets, investors continued to support ETFs, with around $2.9 billion of net new money flowing into the industry. Over the last twelve months, the industry has grown by $6.7 billion, representing a 57% increase year-on-year.
Alex Vynokur, Managing Director of BetaShares said: “The ETF industry has continued to go from strength to strength in the first half of 2015. With product development activity at an all-time high and new players entering the market, investor interest in ETFs is increasing at a rapid pace.”
International equities continued to be the dominant product category for inflows over the first half of the year, with around $1.2 billion of net inflows into international equities products. There was also a return to broad Australian equities exposures as investor confidence in the local market returned, with almost $800 million worth of inflows in this product category.
“Australian investors are continuing to embrace ETFs as a way to easily access overseas equities markets,” said Mr Vynokur. “At the same time, they are also using broad Australian equities exposures as a way to ensure the domestic stock allocations in their portfolio are well-diversified.”
Commenting on the outlook for the industry for the remainder of 2015, Mr Vynokur said he expected strong market growth to continue, with the industry likely to hit between $21 – 23 billion in funds under management by the end of 2015.
“We continue to expect a significant number of new products to join the market in the second half of the year, in what will almost certainly be a record year of new product launches,” said Mr Vynokur.
“ETFs are increasingly gaining momentum with mainstream retail investors, as the larger adviser groups start to include them as part of their product lists, and the range of exposures available through ETFs expand into new areas like smart beta, international equities, currencies and commodities.”
Strong product development continues in June
After 16 months of straight growth, the ETF industry finally took a breather in the month of June, with industry market capitalisation dropping by 2%. From a net flows perspective, however, the industry actually continued to grow, with approximately $500 million in new money flowing into ETFs over the month.
Product development continued to progress strongly in June, with nine new products launched over the month. Inflows into broad Australian equities products was particularly strong, with the category taking in over $400 million in June.
“We have seen investor confidence in domestic equities return in June particularly, suggesting a bullish sentiment towards the Australian share market which has performed well despite pressures from China and Greece,” said Mr Vynokur.
