Australia’s ETF industry reaches record assets of $11 billion

Arian Niron

Arian Neiron

According to the latest ASX Funds Monthly Update, Australia’s exchange traded funds (ETF) industry has surged to a record level in April 2014 to $11.13 billion, an almost 50% increase from 12 months ago.

Year-to-date, over $1 billion has flowed into ETFs quoted on the ASX, with April attracting record inflows of $331 million, an increase from $265 million in March.

Arian Neiron, managing director, Market Vectors Australia, said, “The increasing adoption of ETFs in model portfolios is contributing to the growth of Australia’s ETF industry. Other contributing factors include the ease with which they can be traded on the ASX and the range of investment opportunities available to Australian investors through ETFs.

“ETFs can give investors access to diversified portfolios of Australian and international equities with a range of different index methodologies, as well as currencies, commodities and even bonds,” he said.

The sector attracting the biggest flows in April was international equity-based ETFs attracting $120 million.

The best performing ETF in April was MSCI Singapore Index ETF delivering 7.42% followed by the Market Vectors Australian Property ETF (ASX Code: MVA), which delivered a total net performance for April of 5.88%.

Mr Neiron said Australia’s ETF industry is positioned for continued growth as a result of increasing innovation and as investors continue to adopt ETFs as a mainstream investment, particularly for cost, liquidity and tax benefits.

“The proliferation of ETF choices allows investors to develop tax-effective portfolios. For example, an investor wanting to target shares that pay fully franked dividends to receive franking credits can select an ETF specifically designed for this purpose to add to their portfolio. This can add significant value to investors’ after-tax returns,” said Mr Neiron.

“Another benefit of ETFs is that their holdings are published on a daily basis. ETF investors can access an indicative price called the ‘iNAV’ throughout the trading day similar to a share price. ETF investors therefore know exactly what assets the ETF holds and what their investment is worth at any point in time during the trading day. This transparency is an advantage of ETFs.

“In addition, ETFs generally offer higher liquidity in that investors can trade an ETF just like any other stock on the Australian share market throughout the trading day,” he said.

“A number of ETFs recently launched on the ASX to cater to investors’ evolving needs.  This can be seen in the expansion of real estate and global dividend ETFs, as well as the recent launch of first-of-its-kind ETF, the Market Vectors Australian Equal Weight ETF. We expect product diversification to continue in 2014 with a number of ETF providers set to launch new ETFs on the ASX, further expanding the investment universe for Australian investors,” Mr Neiron said.

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