Risk appetite back as Australian equity ETFs gain momentum
The Australian ETF industry was up again for the month of July with market cap growth of approximately 4% and net new assets of AUD57 million, spurred by renewed interest in Australian equities products, according to BetaShares’ Australian ETF Review for July.
Although yield was still popular among investors through high dividend and cash products, there was a greater risk appetite exhibited by investors with six of the top 10 ETFs by creation value being Australian equities based. The renewed appetite for investing was also seen by the average trading value rising by 5% for the month.
Market cap grew to AUD5.4 billion and is again testing the Australian industry high of AUD5.45 billion, with the best performing funds being agriculture and food based products, up between 11% and 25% for the month of July.
“The worst drought the US has seen in over 50 years has lead to supply strains on agricultural products such as corn, wheat, soybeans and sugar. Prior to ETFs, investors had limited access to agriculture exposures and this highlights the importance of exchange listed products as access vehicles for investors looking to execute on a theme,” says Drew Corbett (pictured), Head of Investment Strategy at BetaShares.
Three new exchange traded products were listed on the ASX during July with two new bond funds and the first bear fund in Australia, designed to go up when the market goes down.
“There are now 81 exchange traded products available on the ASX and the breadth of asset classes now available will continue to push the industry forward and in line with more developed exchanges overseas,” Corbett says.
Last month, net flows into ETFs indicated substantial caution by investors – with the bulk of new inflows going into defensive asset classes such as cash. In July, flows continued in defensive asset classes such cash, but inflows also returned to growth asset classes such as equities.
“We’re seeing a real mixture of activity around ETFs with yield and defensive asset classes continuing to remain popular. However, Australian equities allocations have also increased as investors look for a risk on trade to take advantage of the rally in equities markets,” says Corbett.
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