BetaShares Australian ETF Review March 2014


Another record high for industry as investors get defensive

Alex Vynokur

Alex Vynokur

The Australian exchange traded fund (ETF) market continued to break new ground in March, reaching a record high of $10.5 billion in funds under management, according to the BetaShares Australian ETF Review.

Approximately $200 million of new money flowed into exchange traded products in March, with inflows coming almost exclusively from new money rather than existing asset growth. Total industry market capitalisation increased by 2% over the month.

In a reversal of market trends from previous months, a significant number of investors exited Australian equities, with approximately $40 million flowing out of funds offering these exposures – a sign that investors are cautious about the local equities market.

The two products experiencing the highest inflows for the month were the Australian High Interest Cash ETF and Equity Yield Maximiser fund, indicating investor demand for defensive and high-yielding strategies. Indeed, four of the top five categories by inflows this month were yield oriented further exemplifying investors’ defensive positioning.

“Last month’s flows indicate that investors are showing some caution in regard to the Australian equities market. However, due to the variety of strategies available via exchange traded products, investors have been able to continue to express their investment views beyond simple broad-based equities exposures,” said Alex Vynokur, Managing Director of BetaShares.

“With investors potentially feeling unsure about the future direction of the local equities market, many are taking the opportunity to construct a more defensive portfolio, incorporating cash and yield-focused strategies to guard against potential market volatility.”

In terms of performance, products offering agriculture exposure provided the best returns, particularly due to continued uncertainty on the future supply of soft commodities, given the effects of the United States droughts.

“The best performing exposure each month this year to date has been commodities-based and highlights the value of the asset class in building a diversified portfolio, especially during times of equity market volatility,” said Mr Vynokur.

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