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Australian ETF industry up 31 per cent in 2012 as FUM hits AUD6.4bn

The Australian exchange-traded fund industry continued its steep growth trajectory in 2012 as funds under management increased 31 per cent to end the year at a record high of AUD6.4bn.

There were 25 new products launched during the year bringing total products available on the Australian Securities Exchange to 84, according to BetaShares’ Australian Exchange Traded Fund Review for 2012.

Inflows into ETFs were up approximately 60 per cent on 2011 and reached AUD850m for the year, a striking figure considering flows into retail managed funds decreased three per cent (in the year to September 2012). The continued growth in ETFs in difficult market conditions encountered during 2012 signifies a greater mainstream adoption in the Australian marketplace.

The performance of the local ETF industry mirrors global growth as market capitalisation in global exchange traded products grew 27.6 per cent to USD1.95trn at the end of 2012, driven by large flows to fixed income ETFs.
“While fixed income ETFs launched in 2012 on the ASX, they have not yet gained the same attention compared with overseas markets. The fund which captured the largest amount of money in Australia was the Cash ETF followed by various high yield equity products, which exemplifies the continued investor demand for yield, within more familiar asset classes,” says Drew Corbett, head of investment strategy at BetaShares.

iShares, BetaShares and Vanguard were the top three product issuers in terms of net inflows for the year.

While yield was the theme for 2012 in relation to fund inflows, the top performing products for the year were the Australian property sector ETFs, which returned over 31 per cent and the financial sector ETFs which returned over 26 per cent for the year.

“While the overall Australian stock market was up 20 per cent, certain Sector ETFs performed significantly better. In fact, the top five performing ETFs for the year were sector ETFs , highlighting the potential for investors to generate investment alpha through sector tilting,” Corbett says.
Despite December traditionally being a quiet month for financial markets, industry market capitalisation was up USD107m in the month of December, suggesting investor appetite remains upbeat.

“Of the top 10 products by inflows for December, nine were domestic or international equities funds suggesting investor sentiment may be on the rise,” Corbett says.

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