Trading value at record highs as investors embrace active usage of ETFs
BetaShares Australian ETF Review August 2013
Trading values in the Australian exchange traded fund (ETF) industry hit record highs in August, demonstrating a ‘coming of age’ for the industry as investors increasingly use the products for tactical and strategic purposes.
According to the BetaShares Australian ETF Review for August 2013, the value of ETF trading in the local market reached $1.2 billion over the month, or an average value of $56m a day. This represents a 40% increase from the previous month’s trading figures – and a 128% increase compared to the same period last year.
“The latest figures reveal increased sophistication in the way investors are using ETFs in their portfolios”, said Alex Vynokur, BetaShares’ Managing Director. “While ETFs continue to be used by many investors as long-term ‘buy and hold’ investments, others are realising that they can take advantage of the unique structure of ETFs to make tactical allocations to particular sectors or asset classes.”
Along with the record trading figures in August, the industry also hit a fresh record high for the eleventh consecutive month to reach $8.71bn in assets under management. Assets under management increased by $456 million with almost 75% related to new inflows (i.e. structural industry growth), rather than market capitalisation growth.
This month, the segment to receive the highest level of inflows was developed international equities with investors continuing to be bullish on the US economic recovery. However, there was a substantial increase in inflows into other developed markets suggesting investors are also looking at potential recoveries in other regions such as Europe.
“ETFs provide an excellent guide to investor sentiment, and as evidenced by this month’s inflows and trading values, we’re clearly seeing an increasing amount of activity supporting the economic recovery in developed markets with a tilt towards US and Europe,” he said.
Additionally, yield remains a focus for Australian investors, being the second most popular product class in terms of inflows. Additional trading themes also revealed a continuing increase in gold ETF redemptions, despite the rally in gold prices – a likely indicator that investors are skittish about the possibility of quantitative easing coming to an end in the US.
“Gold continues to be out of favour with investors but has actually been one of the best performing asset classes on the ASX for the last two months, continuing to reverse the April price slide.” he said.
Commenting on the broader exchange traded fund sector, Mr Vynokur said: “In January, we predicted the exchange traded products sector to end the year with $9 billion in assets under management. It is only August and we are just shy of that number with growth exceeding our expectations. We now believe the Australian market will finish the year at $10 billion.”
Click here to download the BetaShares Australian ETF Review for August 2013.
