BetaShares/Investment Trends ETF Report: ETF investor numbers top 100,000

From
  • Number of ETF investors surges 50% in 12 months to ~102,500
  • SMSFs remain a key driver of industry growth
  • Advisers using ETFs in their practices grow to 33%, the highest level to date
Investors in ETF funds up dramatically in the past year.

Investors in ETF funds up dramatically in the past year.

The number of investors in exchange traded funds (ETFs) has surged dramatically over the past year to over 100,000, according to the findings of the BetaShares/ Investment Trends ETF Report released today. Investor numbers have increased 50% in the 12 months to November 2013, the fastest growth seen in the last four years.

The BetaShares ETF Report is a leading comprehensive quantitative and qualitative research study of Australian ETF users available to the market, based on responses of 10,421 investors and 734 advisers on their experiences and usage of ETFs.

Of the estimated 102,500 ETF investors, 46,000 investors held ETFs through SMSFs, illustrating the continued importance of this investor class in driving industry growth. The report also noted that over 50% of investors were using ETFs to gain overseas market exposure vs. approximately 40% last year, highlighting the value investors see in utilising ETFs as an access vehicle.

“The ETF industry experienced its highest level of funds growth ever in 2013, and with that has come a gradual shift in the way investors approach and use ETFs in their portfolio”, said Alex Vynokur, Managing Director at BetaShares. “While the traditional view of ETFs as low-cost, transparent ways to obtain passive domestic market equities access is still relevant, investors are also extending that to look at overseas equities, currency or harder to obtain exposures.”

ETFs poised for further growth

After reaching a record high of $10 billion in funds under management at the end of 2013, this year looks set to be equally strong for ETF growth. A record ~79,000 non-ETF investors  plan to invest in ETFs in the next 12 months, while 70,500 current ETF investors also plan to make an additional investment in ETFs in 2014.

For those who don’t invest in ETFs currently, lack of knowledge about ETFs and how to use them in a portfolio remained the two most common reasons stopping investors from using ETFs. This indicated an opportunity for advisers and ETF providers to work together to educate investors on the value of ETFs in portfolios, said Mr Vynokur.

“It’s important especially as the local ETF industry matures that providers maintain an ongoing dialogue with advisers and investors to help them understand how ETFs can help achieve specific investment goals”, said Mr Vynokur. “Given the expectation of continued strong growth in the sector, keeping up with investor demand for education is vital.”

Gap remains in adviser influenced ETF investments

Mirroring the growth in usage by individual investors, adviser usage of ETFs grew from 28% to 33% of advisers – the highest level to date. However, while 33,000 new ETF investors joined the market in 2013, the percentage of investors who said their adviser played a role in this investment remained at 26%, the same as last year’s figure.

“It’s interesting to note there is still a considerable gap between self-directed and adviser-influenced ETF investing, meaning planners still have a considerable opportunity in front of them to get involved in their clients’ ETF investment decisions,” Mr Vynokur said.

ETF growth not affecting other asset classes

The majority of ETF investments in 2013 came from new money being placed into the market, rather than being redirected from other asset classes. A full 64% of ETF investors made incremental investments to ETFs rather than reducing their exposure to other investments such as direct shares, term deposits.

“The data indicates ETFs are currently satisfying a unique investor need in the market, rather than taking existing funds away from other investment products,” said Mr Vynokur. “The diversification and cost benefits of ETFs mean that they actually appeal to different types of investors than those in direct shares or managed funds.”

Indeed, diversification still ranks as the top reason to use an ETF, with 76% of current ETF investors indicating the diversification aspect was most important to them. Access to overseas markets and low cost were also key reasons why current investors had allocated funds to an ETF.

Australian ETFs – the future

Over the course of 2013, 11 new products were launched on the exchange, and BetaShares believes that over the course of the next few years the ETF product range will continue evolving in the Australian market. From an investor numbers perspective, the ETF report forecasts the total number of ETF investors to range from 126,000-174,500 by end 2015.

“The Australian ETF market continues to mature relative to its international counterparts, and we expect to see ETF usage among investors continue to grow, particularly within the SMSF space. Based on the historical growth rate, we predict assets under management to reach $15 billion by the end of 2015,” Mr Vynokur concluded.

Click here to read the BetaShares/ Investment Trends ETF Report for 2013.

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