Alex Vynokur
The Australian ETF industry continued its growth trajectory in February reaching a new record high of $36.9 billion in funds under management (FUM), despite the declines in global markets, according to the BetaShares Australian ETF Review – February 2018.
Total FUM grew by $339 million (or 1%) for the month. As global share markets posted negative returns, all the growth came from new money, rather than asset appreciation.
The largest inflows by category were International Equities, which accounted for $219 million in inflows, followed by Fixed Income, and Australian Equities, each receiving over $115 million in inflows.
The best performing Australian ETP in February was the BetaShares Strong U.S. Dollar Fund (hedge fund) (ASX: YANK), which recorded a positive return of 7.9%. BetaShares’ Global Cybersecurity ETF (ASX: HACK) ranked second with a 7.2% monthly return.
Capitalising on the volatile global sharemarkets
With a spike of volatility in global sharemarkets, February saw very strong trading activity, with the Australian ETF industry recording it’s second highest trading value on record with over $3.5B traded (the highest, $3.7B was recorded in November 2017).
BetaShares Chief Executive Officer, Alex Vynokur, said: “February’s trading volumes highlighted the liquidity benefits of exchange traded products as market volatility rose.”
“To illustrate this, during the month, we saw many investors using exchange traded products not only to take long positions during the dip, but also to hedge portfolios using short products,” he added.
This shorting activity was evidenced by the increased trading levels of the BetaShares US Equities Strong Bear Hedge Fund (ASX: BBUS), and the BetaShares Australian Equities Strong Bear Hedge Fund (ASX: BBOZ), both of which ranked in the top 10 most traded products in the industry in the month of February.
Institutional use of ETFs highlighted
Mr Vynokur said the activity in the month highlighted the increased usage of ETFs by Australian institutional investors. This was true of both inflows and outflows, with large institutional size flows into sector ETFs, with the BetaShares S&P/ ASX 200 Resources ETF (ASX: QRE) experiencing the largest inflow into a single ETF.
The outflow patterns also showed institutional usage, with Cash ETFs receiving the highest level of outflows due to institutional portfolio re-allocations.
“It’s a sign of maturity of our industry that institutions are now using ETFs to express sector views as well as using Cash ETFs for portfolio allocations – we are confident that such institutional usage will continue to grow over time”.
Launch of Active ETFs push product offerings to new highs
Two new Active ETFs, launched jointly by BetaShares and Legg Mason in February increased the total number of Active ETFs trading on the ASX to 16 and the total number of ETPs to 228. “As the ETF industry continues to grow and mature in Australia, we expect to see further product innovation this year,” says Alex.