Australian ETF assets soar by 50% in a year

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Australia’s booming exchange traded fund industry recorded a nearly 50 per cent growth in assets over the past 12 months helped by robust flows into global equities-focused passive strategies, data show.

Total assets across Australia’s 394 ETF products rose to a new all-time high of A$226.6bn ($152.4bn) as of end-September, up 48.6 per cent from A$152.2bn at the same time last year, according to Global X.

Market movements accounted for A$31bn of this figure, while net flows into such strategies were at A$26bn. The conversion of numerous unlisted active funds into ETFs also added A$17bn to the sector, the report showed.

Strong growth has been helped by record inflows over the past year, with monthly ETF sales breaching A$3bn in July and August before dropping slightly to A$2.8bn in September, according to Betashares data.

Australian ETFs pulled in A$23.3bn in net flows in the year to end-September, putting the industry on the trajectory to surpass the record whole-year net flows of A$23.6bn set in 2021, according to data from Vanguard and the Australian Securities Exchange.

Investors poured in over A$12.7bn from July to September, more than double the amount they allocated to these products during the first two quarters of the year, at A$5.28bn and A$5.38bn respectively, Vanguard said in a report last week.

Vanguard noted that ASX-listed global equities ETFs, particularly passive vehicles, accounted for over 56 per cent of total inflows this year as Australian investors hoped to cash in on the boom in the US stock market and, to a lesser extent, other offshore markets.

During the September quarter, global equities ETFs attracted A$7.7bn in net flows, bringing the total amount invested in this segment to A$13bn during the first nine months of the year.

Adam DeSanctis, head of ETF capital markets, Asia-Pacific at Vanguard, said investor appetite for global equities ETFs was “not subsiding and continues to outpace the inflows into Australian equity ETFs and other industry segments”.

Net inflows to other asset classes also improved during the third quarter, according to the Vanguard report.

Australian equities ETFs registered A$2bn in net flows during the three months to September, while Australian fixed income strategies had A$1.49bn and global fixed income products took in A$446mn, the report showed.

Vanguard’s DeSanctis noted that Australian investors have continued to flock to ETFs as it is the “quickest and lowest-cost way to access different types of asset classes and offshore markets”, on top of offering diversification and ease of trading.

Australian investors who have allocated to index funds realised A$14.4bn in investment cost savings over the past 26 years, Vanguard’s Investment Strategy Group said in a report last month.

In line with the industry’s continued growth, Australian ETF assets are on pace to hit A$1tn by 2030, with artificial intelligence and fixed income among the top draws for investors, Global X said last month.