Risk Return Metrics ETF Monthly Report - August 2021

Rodney Lay

Risk Return Metrics

The Australian ETF sector has recorded exponential growth over the last 18-months and, by some estimates, is on track to reach $140bn by 2021 year-end. More recently, approximately $5.2bn flowed into the Australian ETF sector as a whole over the second quarter of CY21, making it the seventh largest on record. Of that, 63% flowed into international equities ETF and only 13% into Australian equities ETFs. Based on fund flows we take a dive into the key product trends in the Australian ETF market, both by sub-segment and ETF type.

A component of this growth has been active ETFs. The last 18 months have proved a turning point for active ETFs, with the number of active ETFs and total FUM increasing substantially. There has been three underlying key drivers to the substantial growth in the ETF sub-segment.

  1. ASIC's lifting of its six-month suspension of actively managed ETFs removed after its review of the use of internal market makers;
  2. The launch of the Magellan dual listed / unlisted managed fund structure, providing a simpler process to add exchange distribution rather than duplicating an existing unlisted managed fund, and: 
  3. Arguably the efforts of Chi-X to minimise client costs and enhance client speed to market and efficiency.

The addition of active ETFs brings increased tactical options, diversification potential and growth options for ETF investors.

And Smart Beta ETFs continue the sub-segment FUM march. It is an opportune time to consider smart beta ETFs for added portfolio diversification and tactical tilts, including multi-factor based ETFs given the rotation out of mega-cap and largely technology plays (which typical dominate international equities market cap weighted indices that many passive ETFs track).

We also take a look at the recently listed VanEck Bentham Global Capital Securities Fund

As per usual, the ETF Monthly report includes detailed profiles on 180 ETFs, performance summaries and ETF performance ranking analysis. 

Please click on the pdf below to access the full report.

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Rodney Lay
Rodney Lay
Risk Return Metrics

Investment analyst with particular experience in listed and unlisted investment strategies, equities and structured products.

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