Strong Q3 inflows lift ETF assets to record $219.5bn – 60% of flows target international equity index funds

Adam DeSanctis

Robust investor cash flows over the September quarter, most notably into international equity index-tracking ETFs, helped to lift the Australian ETFs industry’s assets under management to a new record high of $219.5 billion.

The value of Australia’s ETFs industry has risen by more than $46.6 billion since the start of this year, fuelled by the combination of strong investor inflows and global share market gains.

ASX and Vanguard data shows investor cash flows into Australian ETFs on a year-to-date basis have totalled $23.3 billion, including more than $12.7 billion over the September quarter. This compared with $5.38 billion of investor inflows over the June quarter and $5.28 billion over the March quarter.

ASX-listed international equity ETFs, primarily index-tracking funds, have accounted for more than 56% of total inflows this year as investors continue to target the strong growth experienced on U.S. share markets and, to a lesser extent, other offshore markets.

A further $7.7 billion of investor cash flows were directed into international equity ETFs over the September quarter, bringing the total amount invested in this segment during the nine months to 30 September to over $13 billion.

By comparison, around $2.09 billion flowed into Australian equity ETFs over the third quarter. This added to the $1.47 billion invested into this segment over the June quarter and the $1.48 billion over the March quarter.

“The appetite for international equity ETFs by investors is not subsiding and continues to outpace the inflows into Australian equity ETFs and other industry segments,” said Adam DeSanctis, Vanguard’s Head of ETF Capital Markets, Asia-Pacific.

“For Australian ETF investors, who now number over 2.2 million, the best investment strategy over 2024 and beyond is to focus on long-term investment growth while staying diversified across different markets and segments.

“Beyond diversification and ease of trading, which are the biggest motivations for investors choosing to use ETFs, a high percentage of investors see ETFs as the quickest and lowest-cost way to access different types of asset classes and offshore markets.”

Meanwhile, inflows into Australian fixed income ETFs accelerated over the third quarter as investors targeted bond funds to lock in relatively higher income levels.

A total of $1.49 billion was directed into Australian fixed income assets over three months to 30 September, up from $601 million over the June quarter and $694 million over the March quarter. Inflows into international fixed income ETFs totalled $446 million compared with $286 million over the June quarter and $108 million over the March quarter.