ETF investors thinking global, not local

A groundswell of local interest in offshore investing has seen nearly 70% of new funds invested in ASX-listed ETFs so far this year go into International Equities exposures.

Mark Oliver, Head of BlackRock Retail Business in Australia, said: “In a market known for its domestic bias, this is further demonstration that Australian investors are increasingly willing to leave their traditional local markets and signals a new era of global investment in this country.

“International ETF inflows for the first three months of this year are booming.

“So far this year we have seen new money flows into international equity ETFs on the ASX reach $266 million, significantly more than the full calendar year for 2012 which was $219 million, and already approaching the total 2011 new money flows of $312 million.”

BlackRock’s ETF business, iShares, is the world’s largest ETF provider.

Mr Oliver went on to point out that in 2013 international ETFs have so far captured 70% of new money into all Australian-listed ETFs.

“While the 12-month figures show some 51.3% of funds flowing to International Equities via ETFs, the year-to-date figure of 70% indicates that the trend is only accelerating, quite possibly since the resolutions in relation to the Euro crisis in September last year.”

Mr Oliver identified a number of drivers for this offshore interest, including the growing limitations of the local equity market in the face of ever increasing investment flows, a strong Australian Dollar, and the increased accessibility for retail investors to global markets that’s now available.

“There is growing understanding that the Australian equities universe can only take an investor so far in terms of the types of companies listed here. And, while in the past gaining the right kind of global exposure was a privilege afforded primarily to the big institutional players, the advent of ASX-listed global ETFs has changed all that,” he said.

“Investors can now enjoy the dual benefits of global opportunity and the advantages offered by the ETF vehicle: transparency, liquidity and cost effective exposure to a wide range of otherwise hard-to-access markets.”

Mr Oliver pointed out the ability to blend a selection of ETFs that comprise a fair representation of value pockets across the globe also offers appeal. It’s a methodology that enables advisers not only to deliver global expertise and value to clients, it is also highly workable – and eminently scalable – in terms of growing a practice.

“Blending ETFs in this manner means advisers can offer their clients diversified exposure at a granular level that’s reflective of the subtleties of the global market,” he explained.

“So, for example, an adviser might consider combining our iShares Global 100 ETF (IOO) which seeks to tap into the strong balance sheets and profitability of the world’s leading global mega-cap companies, with the iShares MSCI Emerging Markets ETF (IEM) which seeks to capitalise on these countries’ role as the engine for global growth.”

He also said that the strong inflows to international ETFs – with the iShares Core S&P 500 ETF (IVV) proving the single most popular product – had undoubtedly contributed to iShares’ ASX-listed ETF business reaching the $2 billion AUM milestone this month.

“Of our 26 ASX-listed ETFs, 19 offer international exposures. The numbers indicate that investors and their advisers are responding more than positively to the global choices they offer,” he said.

The post Investors thinking global, not local, as record ETF inflows show appeared first on AdviserVoice.