Number of Australian ETF investors passes two million for the first time

Alex Vynokur

Leading Australian fund manager, Betashares, has released new industry research which showed that the number of Australian investors holding ETFs in their portfolio passed two million in 2023.

The 2023 Betashares/Investment Trends ETF Report also found that an additional 310,000 Australians intend to invest in ETFs for the first-time next year, while an existing 1.39 million existing ETF investors intend to reinvest more during 2024.

Releasing the findings, Betashares CEO, Mr Alex Vynokur, said “Despite another volatile year for markets, and declining investor sentiment, the Australian ETF industry has remained highly resilient, with more investors than ever before investing in ETFs and doing so for a greater part of their portfolio.”

ETF investors plan to go global again next year

In a sharp reversal from 2023, ETF investors reported a significant jump in plans to add International Equities exposure to their portfolio, followed by Australian Equities and Commodities.

“2023 was a strong year of fixed income and cash investing, as central banks continued their efforts to get inflation down by raising interest rates. Based on our research, we expect to see a return to more meaningful allocations by investors to growth assets next year, which may see global equities exposures retake their traditional leadership position in terms of the most popular asset class to invest in via ETFs,” Mr Vynokur said.

“That said, we expect fixed income and cash ETFs to remain popular over the course of 2024. With the attractive yields on offer, combined with the view by many that the rate hiking cycle is nearing its end, the case for fixed income remains compelling”, Mr Vynokur continued.

Diversification still the main driver for ETF adoption

Portfolio diversification remains the single biggest reason investors choose ETFs, as has been the case in previous studies. Convenience also continued to rank second as a driver for ETF adoption, while ability to gain exposure to specific overseas markets saw an uptick in responses from investors compared to previous years.

“The volatile market conditions, coupled with tense geopolitical environment over the last year, once again highlighted the importance of diversification, which is one of key benefits of ETFs” Mr Vynokur said.

Optimism grows as ETF investors hope for higher returns

ETF investors are expecting average portfolio growth of 6% next year, after reporting an average 2% gain this year.

“Australian ETF investors appear to be generally more optimistic about their portfolio next year, with investors expecting stronger portfolio growth next year,” Mr Vynokur continued.

Highest forecast growth in new investors since 2020

Looking ahead to next year, the research indicates strong growth prospects, with an additional 310,000 Australians indicating they expect to start investing in ETFs for the first time – the highest pool in the next wave of ETF investors since 2020.

“On the back of continued growth in the number of ETF investors, high levels of accessibility and an ever-increasing universe of ETF solutions, we expect net flows from investors to exceed $20 billion next year, with industry funds under management on track to exceed $180 billion by the end of 2024, up from around $150 billion today,” Mr Vynokur concluded.

The 2023 Betashares/Investment Trends ETF Report surveyed 1,275 financial advisers and 1,757 current ETF investors between June and August 2023.