In September, the ETF industry returned to growth with units outstanding increasing by 1.5 per cent representing $25 million of “new money”. This was in contrast to declines in the ETF total market cap which reduced by $270 million due to the downturn in bourses locally and globally.

Volatility continues to dampen overall trading volumes with investor conviction on market direction remaining low. However, the ETF market reveals how investors are staying exposed to markets:

• Interest in income/ dividends – Investors are looking at income as a source of returns with the three high dividend ETFs receiving strong inflows and trading volumes above average.
• Gold still a safe haven – Investors continue to flock to currency hedged gold as a store of wealth in uncertain times which continues its strong inflows from August.
• International and currency ETFs proving popular – Trading volumes across international ETFs increased by 10 – 15% and the US Dollar ETF received net creations of 5% suggesting investors are taking a view on the local fundamentals weakening.
• Investors perceive value in markets – While the market cap of the local ETF market dropped 5%, inflows of $25 million suggest some investors believe equity markets are undervalued.

“As the ETF industry continues to grow, the uncertainty and low market sentiment is skewing investors to products which will gain from a weakening in the Australian market. International shares, currency, hedged gold and dividends were favoured by investors during market volatility,” said Drew Corbett, Head of Investment Strategy of BetaShares.

“While still maturing, the suite of ETFs available for investors continues to expand allowing investors to benefit from a variety of market conditions,” he said.

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