Vanguard ETFs attract 41 per cent of total market flows as global economic recovery continues 

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Vanguard received 41 per cent of total ETF market inflows in H1 2021, according to the latest figures released by the Australian Securities Exchange (ASX) and Vanguard.

Vanguard also recorded its second largest quarter on record with over A$2 billion in inflows and had the top three most popular funds in the market: Vanguard Australian Shares Index ETF (VAS, A$766 million), Vanguard MSCI Index International Shares ETF (VGS, A$404 million) and Vanguard Diversified High Growth ETF (VDHG, A$391 million).

“It’s encouraging to see an increasing number of investors putting their trust in Vanguard and investing with us. We’re also pleased that investors continue to realise the many benefits of broad-based ETFs that have stood the test of time, particularly how they provide low-cost, diversified exposure to overseas markets that may otherwise be inaccessible,” said Minh Tieu, Vanguard’s Head of ETF Capital Markets, Asia-Pacific.

The Australian ETF market also surpassed A$111 billion in AUM as investor momentum continues.

Australian investors continue to favour international equities

Global equity ETFs were the asset class of choice for Australian investors in the first half of the year, recording A$2.2 billion in inflows in Q1 and A$2.7 billion in Q2 (total: A$4.9 billion in H1 2021).

Domestic equities drew a total of A$1.5 billion in H1 2021, 69 per cent less than global equities.

Commenting on the demand for international shares, Mr Tieu said: “while COVID-19 management differs in effectiveness between countries, investor confidence in overseas markets continues to improve.

“As vaccination rates continue to rise and consumption continues to rebound, Australian investors are looking for ways to capitalise on international growth opportunities with economies reopening.

“Our mid-year economic and market update forecasts at least 7 per cent full year growth for the US and the UK for 2021, 8.5 per cent full year growth for China, and above 6 per cent full year growth for emerging markets. Australia is forecast to record full year growth of around 5.5 per cent for 2021.

“International equity ETFs are proving to be an efficient way for investors to gain access to global investment opportunities, while at the same time reducing home country bias and further diversifying portfolios”.

Bonds still play an important role in portfolios

While equities dominated demand in H1 2021, domestic bonds still recorded A$690m in inflows while global bonds recorded A$608m.

“Returns from bonds in both Australian and international markets are likely to be modest, but we see bonds not purely as return-generating assets, but rather as essential portfolio diversifiers. Bonds play a crucial role in reducing the volatility of a portfolio when markets are turbulent and serve as a ballast to riskier assets such as equities,” said Mr Tieu.

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