Australian ETF Review HY2021– Impressive growth as the industry steams past $100bn
In what was a milestone first half-year, we saw Australia’s ETF industry break the $100 billion mark in March 2021 and then steam ahead beyond that point.
Australian ETP Market Cap: August 2001 – June 2021
CAGR: Compound Annual Growth Rate
Source: ASX, Chi-X, BetaShares
- ASX Exchange Traded Product market cap: $115.7 billion1
- Market cap growth for half year: 22%, $20.6 billion
- Market cap growth for the last 12 months: 76%, + $49.9 billion – the fastest yearly growth (in dollar terms) on record
Comment: With strong sharemarket performance as a tailwind we saw industry funds under management increase rapidly. We saw Australian ETF industry growth of 22% for the half, to end the financial year at $115.7B, an all-time high. Industry FuM grew ~$20B in the first half of the year, just under half of which came from net flows, and the remainder from asset value appreciation.
1. Includes total FuM for ETFs trading on both ASX and Chi-X
- Net new money for half year (units outstanding by dollar value): +$8.8 billion (6% more growth compared to $8.3 billion in the first half of 2020)
Comment: While asset value growth was far more meaningful as a proportion of growth compared to previous periods, we continued to see robust inflows into the industry, with net new money for the half year of $8.8 billion. This represents an increase of 6% from the first half of 2020, where net flows were $8.3 billion. That said, flows were a lot lower than the previous six months (which were a record for the industry) – in the second half of 2020, flows were more than $14 billion.
- 266 Exchange Traded Products trading on the ASX and Chi-X
- New/closed products: 15 new products launched in the half year, 5 products matured, 2 products closed
- Seven new issuers joined the market, all of which were Active managers, four funds converted into Active ETFs – there are currently 30 issuers of ETPs in Australia
- We saw the first conversion of a Listed Investment Company into an Active ETF (Monash Investors)
Comment: Product development activity remained robust in the first half of 2021, with 15 new products launched. Perhaps most notably this included seven new issuers entering the market, all of which were active managers.
Strikingly, in this last half we saw the first conversion of a Listed Investment Company into an Active ETF (Monash Investors) – this is a trend that we believe many more will follow into the future (Magellan have already started the process for one of their LITs), as the LIC/LIT industry continues to languish.
Passive index products took in the vast majority of flows for this half year, and remain the dominant category by a very wide margin. Active ETFs saw their share of flows marginally improve (1 percentage point difference to the 2020 share of 10%). It is important to note that the absolute number of active ETFs that are taking in substantial flows are few and far between – for example, the top three active ETFs for flows represented more than 80% of the category’s flows this half.
- Trading value for this half was almost identical to the previous half year period, and remained high post the ‘break out’ we saw in trading during the initial reaction to COVID in Market 2020 and beyond.
Comment: ETF trading values remained strong. Trading value for this half was almost identical to the previous half year period and we are now seeing sustained ETF monthly trading values of between $7 billion and $8 billion on the ASX.
- Best performing exposures for the half year came from the Crude Oil Futures ETF (ASX: OOO) (50% return for half year) followed by our Geared U.S. Shares Fund (ASX: GGUS) (34% return for half year)
Top 5 category inflows (by $) – YTD
Comment: Like 2020, the first half of 2021 has seen Global Equities products dominate in terms of flows – the category receiving more than 3x the flows of the next biggest category, Australian equities ($5 billion and $1.5 billion respectively). Notably, this half we saw the multi-asset class and listed property categories enter the top 5 categories for flows.
Top 5 category outflows (by dollars) – YTD
Comment: Outflows were generally very low, with only the cash category receiving minor outflows.
Top sub-category inflows (by dollars) – YTD
|International Equities – Developed World||$1,761,483,464|
|International Equities – Sector||$1,085,390,287|
|Australian Equities – Broad||$987,676,845|
Top sub-category outflows (by $) – YTD
|Australian Equities – Geared||($16,504,639)|
|Australian Equities – Short||($3,605,494)|
At the end of 2020 (when the industry was $95 billion) we forecast the industry to end 2021 at $110-$120 billion. It appears as though our forecasts were too conservative and are now revising our forecast upward and expecting total industry FuM at the end 2021 to be somewhere between $132 billion and $138 billion.
ETFs are one of the fastest-growing investment vehicles in the Australian market. For a full range of products available to investors, please visit the BetaShares website.
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Ilan was a founding team member of BetaShares and is responsible for corporate & product strategy. Previously, Ilan worked for The Boston Consulting Group (BCG), one of the leading global strategy consulting firms.