Arian Neiron

VanEck is bringing generative AI-powered stock selection to the ASX, giving investors access to a portfolio that learns, adapts and searches for international equity opportunities using computational power and investment intelligence beyond human capability.

The VanEck Dynamic International Equity ETF (ASX: GOAT) will be Australia’s first ETF that uses AI to select international stocks.

The strategy will be available on Monday 20 July, when GOAT begins tracking the Akros Enhanced World ex Australia Index. This next-generation index is built using generative reinforcement learning. Unlike conventional strategies that start with a fixed factor library or a human-defined view of what should work, the model starts from a blank slate, discovering, testing and validating investment signals across international markets.

Each month, the AI model scores approximately 1,200 of the world’s largest developed-market companies across more than 10,000 signals spanning company fundamentals, technicals and macroeconomic indicators. It then selects the 150 companies with the highest assessed probability of outperformance.

Signals that lose predictive power are retired. New signals take their place. The result is a dynamic international equity portfolio designed to learn, adapt and recalibrate as market conditions change.

Arian Neiron, CEO and Managing Director, VanEck Asia Pacific, said GOAT marks the beginning of a new era for Australian investors.

“The industrialisation of alpha is underway and it will be as consequential for asset management as indexing was in the 1970s,” said Neiron.

“AI doesn’t get anchored, it doesn’t get emotional and it doesn’t have career risk that stops it from being early. What was once the exclusive preserve of multi-billion-dollar quant shops with floors of PhDs is now accessible to every Australian with a brokerage account.

“That is not an incremental improvement. That is a structural re-ordering of who gets access to intelligence and on what terms,” said Neiron.

Since the index base date in July 2005, the simulated track record for the Akros Enhanced World ex Australia Index has delivered 12.63% per annum, compared with 9.62% per annum for the MSCI World ex Australia Index, a difference of 3.01 percentage points annually. Over the same period, the index outperformed the MSCI World ex Australia Index in 77% of rolling 12-month periods and 95% of rolling three-year periods¹.

The simulated index also produced a maximum drawdown of -28.03%, compared with -38.41% for the benchmark. Its up-capture ratio was 105 and its down-capture ratio was 85.

“What is compelling about the simulated record is not just the return premium, it is where that premium was earned,” said Neiron.

“The strategy’s strongest relative performance has come in stressed, weak-cycle conditions. An up-capture of 105 and a down-capture of 85 is a rare combination. That is what genuine dynamism looks like over a full cycle.”

The index was developed by VanEck in partnership with Akros Technologies, a Seoul-based AI and quantitative index specialist whose engine underpins 75 ETFs globally with approximately US$10 billion in index AUM.

^Notes:
[1] Data to 30 June 2026. Past performance is not indicative of future performance of the index or GOAT.

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Arian Neiron

New research has revealed ETF adoption among advisers has intensified in the last year, with over 70% reporting greater usage and 65% using two or more smart beta strategies. The depth of usage has also expanded to cover a broader range of asset classes, with Australian equities, global infrastructure, and emerging markets the most popular asset classes among advisers adopting smart beta strategies.

The 2025 VanEck Smart Beta Survey also found more than half of advisers (50.13%) had replaced market cap/passive exposures in client portfolios with smart beta (a 10.77% increase since 2022), and even more advisers (61.27%) had done the same for active funds. Two out of three respondents agreed that smart beta is going to become more prevalent in portfolios and 99% of respondents currently using smart beta ETFs expressed satisfaction.

The survey also revealed that one in four financial advisers invest in crypto as part of their personal portfolio but only 16% are currently invested or considering investing on behalf of clients. Bitcoin remains the most popular digital asset among financial professionals.

On the topic of private markets, 60% of financial advisers currently allocate, with single private market funds and listed vehicles being the most popular way to gain exposure. However, nearly two thirds of respondents are not planning on increasing their allocation to private markets over the next three years.

At least 1 in 2 respondents currently utilise an SMA/Managed Account. Of those currently considering using an SMA or Managed Account, investment track record and credibility were the two most important factors.

Arian Neiron, CEO & Managing Director, VanEck Asia Pacific, said: “One thing is clear from ten years’ worth of survey data: ETFs have become an indispensable tool for advisers targeting cost-efficient outcomes. Penetration is effectively universal at 96.41%. We see smart beta tracking the same arc, with adoption lifting from 36.81% in 2016 to 47.85% in 2025.

“The smart beta switch has been reflected in net flows. In 2023, only two months cleared $500m. Last year, this surged to nine months, with four months crossing the $1 billion threshold for the first time. This year has been softer with the broader markets pullback, however six out of eight months still topped $500m, and July set a new all-time high of $1.1 billion,” said Neiron.

Smart beta ETFs go beyond tracking a market capitalisation index offering investors access to smarter strategies and targeted outcomes, typically for a fraction of the cost of active strategies.

The annual VanEck Australian Smart Beta Survey is the largest survey of its kind in the world, capturing investment trends in the Australian market. This year, marking its 10 year anniversary, the survey attracted 556 responses from financial advisers and brokers working in Australia.

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Arian Neiron

VanEck is expanding its smart beta range with a new growth international equities strategy, the VanEck MSCI International Growth ETF (ASX: GWTH). Subject to final regulatory approval, this new ETF is expected to commence trading on ASX on 28 August 2025.

For over a decade, VanEck has pioneered smart beta ETF strategies in Australia, with several being the first of their kind on the ASX. These strategies offer investors the ability to construct portfolios with a targeted outcome in mind. GWTH is the newest addition, complementing VanEck’s international quality, value and small cap strategies.

The last decade has also seen ‘growth’ companies outperform ‘value’ companies after many decades of underperformance. Investing in growth stocks has traditionally been the domain of active managers, limiting access by the broader investor population. GWTH democratises this opportunity, with convenient access via ASX at a fraction of the typical active management fee. As with other smart beta strategies, it utilises a systematic, rules-based approach that targets outperformance.

Arian Neiron, CEO and Managing Director of VanEck Asia Pacific, said: “Investors have traditionally bolstered their risk-adjusted returns with allocations that focus on a specific sector, style, size or thematic. This is because the highest-growth stocks tend to be underrepresented in benchmarks. This manifested in the first half of 2025, where the highly visible NVIDIA, Apple and Microsoft mega-caps took a back seat to lesser-known stocks such as defence intelligence company Palantir Technologies (up 492% in the last year)* and mobile advertising platform AppLovin (up 417% in the last year).*

“GWTH will allow investors to add a dedicated growth exposure to their portfolio, for passive fees. Importantly, the growth factor is a diversifier away from the over-held companies, with NVIDIA being the only ‘Magnificent 7’ company currently included in the portfolio. Minimal overlap between GWTH, the international benchmark, and factor ETFs provides further diversification benefits.

“We undertook a comprehensive research and portfolio engineering process to work through shortcomings in global growth benchmarks. We observed that the traditional index often led to diluted growth exposure and style contamination, making it less effective for those seeking genuine growth factor returns. Our objective with GWTH was to develop a smart beta strategy that captured “pure” growth characteristics, and we believe that a disciplined approach to delivering growth exposure can overcome the style drift and capacity challenges often faced by active managers in this segment,” said Neiron.

The launch of GWTH will bring VanEck’s total number of ETFs on ASX to 46, and extends on the business’ commitment to innovation and helping investors access the opportunities.

———

*Source: Bloomberg, performance 12 months to 15 August 2025 in AUD. Not a recommendation to act.

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Arian Neiron

New research from VanEck highlights a common misconception that could be short-changing Australian investors. Published last week, the Emerging Strength: Why EM bonds are the future of fixed income report reveals the surprising strength of bonds from emerging market economies, and why they have outperformed developed market equivalents.

This strength is reflected in the performance of both passive and active ETFs in the fixed income/credit spectrum, with emerging market bondsi beating Australian hybrids, subordinated debt and corporate bonds (commonly considered the highest-yielding debt securities) to be the top performing fixed income asset class in Australia over one year and three years.ii

While emerging markets have long suffered the misconception of being “riskier” for investors, VanEck’s analysis, based on the Efficient Frontier framework and Sharpe ratio, revealed that an allocation to emerging market bonds could in fact help investors optimise their fixed income portfolios for better risk-adjusted returns.

Arian Neiron, CEO of VanEck Asia Pacific, said: “2025 has been marked by mass upheaval, and investors are having to challenge some long-held perceptions. The outperformance of emerging market bonds is not a new phenomenon, however geopolitical developments this year have brought alternative exposures into greater focus.

“To many, emerging markets are synonymous with perceived risk due to several crises in in Latin America, Asia and Russia throughout the 80s and 90s. However, these crises were resolved decades ago. The irony is that many of the negative characteristics commonly associated with emerging markets, such as highly indebted governments, gross budget deficits, and loose monetary policy, are more accurately attributed to developed markets – a shift that has become particularly pronounced in light of the US’ burgeoning debt.

“The superior risk-return profile of emerging market bonds reflects a new reality where the hegemony of developed markets can no longer be taken for granted. We have observed the fiscal prudence of many countries in the Asia, Latin America and Eastern Europe regions, which stand out for having low-inflation, stable currency environments conducive to sustainable growth. We are also cognisant that emerging markets are not a monolith, and countries that have demonstrated fiscal strength historically are not immune to monetary missteps. Taking full advantage of the opportunities in emerging markets debt, we think, requires an unconstrained active approach, and strategies like VanEck’s active emerging markets bonds ETF provide access to this market,” said Neiron.

The VanEck Emerging Income Opportunities Active ETF (EBND) is the top-performing fixed income ETF in Australia over the one-year and three-year timeframes.ii Benefiting from an actively managed, unconstrained approach, EBND invests in sovereign and corporate bonds denominated in hard and local currencies that are diversified by currency, region, maturity, duration and credit.

Read the report.

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Arian Neiron, VanEck CEO and Managing Director, Asia Pacific, said: “The Australian ETF industry experienced record net flows last year, and we anticipate this record will be surpassed in 2025 with wealth managers increasingly adopting ETFs as the preferred building blocks for portfolio construction. The ability to achieve targeted investment outcomes and access systematic, research-backed strategies with relatively low fees and ease of accessibility on exchange is driving this momentum, making ETFs the go-to option for investors and advisers alike.

“The Australian ETF market is on track to surpass $300 billion by year-end, with 2025 shaping up to be a defining moment in the industry’s evolution. Advancements in systematic investing and the integration of artificial intelligence are set to redefine the ETF landscape, creating new opportunities for investors. Expanding the team is indicative of our commitment to being at the forefront of investment innovation, and ensuring our capabilities, products, services, and insights remain best in class for Australian investors,” said Neiron.

VanEck’s investments and capital markets team will be expanding with the appointment of Anna Wu to in the newly created role of senior associate, cross-asset investment research. Anna will bring additional expertise in multi-asset investment research and strategy, and financial modeling. Prior to joining VanEck, Wu held senior consultant and investment associate positions at PwC and Macquarie Group, with a focus on banking and capital markets, and investment strategy.

The firm’s client services capabilities will also be bolstered with the creation of two new positions. Claudia Catalanotto is now Client Solutions Executive and Matthew Sullivan has joined the team as Business Development Associate. Formerly an M&A specialist at EY, Sullivan will focus on supporting VanEck’s growing client base in New South Wales, Western Australia and Victoria.

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Arian Neiron

VanEck will be listing the first Australian equity long short ETF on ASX on 23 January 2025. The VanEck Australian Long Short Complex ETF (ASX: ALFA) is an actively managed, high conviction, unconstrained Australian equity portfolio that targets long and short positions.

ALFA represents an extension of VanEck’s brand, capabilities and track record. Globally, its history in active fund management dates back to the 1950s – a heritage that has transposed into the business’ ecosystem and philosophy. For over a decade, VanEck has leveraged a substantive quantitative platform to devise innovative smart beta ETF strategies in Australia across a range of asset classes – from equities to credit and fixed income, as well as being leaders in alternatives such as gold and digital assets.

ALFA’s investment approach utilises VanEck’s deep quantitative background and active capabilities. Led by a team of experienced portfolio managers with a unique combination of actuarial and quantitative qualifications, the fund leverages an active management framework that analyses tens of thousands of data points in real-time. The outcome of the process is that it identifies those companies that have a statistically significant probability of excess return and those that have a higher probability of underperforming. The resulting portfolio consists of long and short Australian equity positions that aim to outperform the S&P/ASX 200 over the medium to long-term.

Arian Neiron, VanEck CEO and Managing Director, Asia Pacific said: “The Australian equity market is littered with inefficiencies to exploit. It is hyper-concentrated, over-crowded and lacks persistent ‘factor’ dominance. With style, sector and size leadership proven to be highly idiosyncratic, this has presented an opportunity to exploit the market’s inefficiencies through a highly active approach in 2025 and beyond.

“The launch of ALFA is timely given the complexities of the current investment climate. We saw last year that market swings and sector-level dispersion were more pronounced than ever, with shifting global growth expectations, geopolitical tensions and the evolving interest-rate environment impacting performance. This volatility is expected to persist into 2025. Meanwhile, style rotations and valuation gaps are presenting short-term opportunities in the Australian market that require adaptability that are not supported by traditional active funds but will complement core beta and smart beta approaches,” said Neiron.

VanEck has a history of harnessing technology-driven insights and advanced analysis to fuel investable opportunities. As the pioneer of smart beta ETFs across equities and fixed income on the ASX, VanEck developed single factor quality and value strategies as well as a multi-factor emerging markets equities, and higher-yielding Australian corporate bonds strategies as well as pioneering equal weight investing in Australia. These innovations have enabled investors to construct investment strategies with targeted outcomes.

“Recent and ongoing advances in technology and programmable learning have enabled us to identify a compelling new opportunity for the investing community. We think investment approaches such as the one ALFA offers are the portfolio construction tools of the future, and are positioned to deliver an all-weather solution for Australian equity investors seeking excess returns,” said Neiron.

The launch of ALFA brings VanEck’s total number of ETFs on ASX to 44 and extends on the business’ commitment to innovation and helping investors access the opportunities.

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Good ESG governance leads to improved financial performance.

Research from academics, asset managers and index providers has found a link between good ESG governance and improved financial performance, largely through risk reduction. Targeting high ESG performers can therefore pay real dividends to investors.

On the other hand, not implementing ESG can ‘cost’ companies and investors better returns and even mean losses, as anyone who had invested in Volkswagen before its diesel deception would have realised; VW shares have never recovered after it admitted to cheating emissions tests in the US in 2015.

Dr. Philipp Krueger, an Assistant Professor of Responsible Finance at the University of Geneva, has recently studied the relation between ESG characteristics and investment performance and says ESG reaps risk reduction for companies. Krueger says in a 2017 study he co-authored:

We provided evidence that investors with better sustainability footprints exhibit higher risk-adjusted investment performance. Our analysis suggests that the main mechanism through which better sustainability translates into better investment performance is not return enhancement but rather risk reduction. As such, we find that many standard risk measures are significantly lower for institutions with better sustainability footprints. It thus seems that integrating ESG considerations into investment decisions can contribute to better performance through improved risk management.[1]

In their 2015 research paper, Finding Alpha in ESG[2], Credit Suisse finds that all five portfolios that it constructed based on ESG data added alpha over a seven-year time horizon. Credit Suisse examined the opportunity to capture alpha using data from each of the three ESG pillars and concludes:

“For the Environment pillar data we conclude that strong management of environmental issues “pays” and weak management of environmental issues “costs” at the portfolio level. We found similar results using the Governance pillar data, i.e., strong governance “pays” and weak governance “costs” at the portfolio level. For Social pillar data, we find that companies which have overall the weakest management capabilities and highest exposure to social issues significantly underperform all other companies, i.e., poor social performance “costs” at the portfolio level.”

Credit Suisse found that integrating ESG factors can enhance portfolio performance through both lower exposure to negative risks related to ESG factors and higher exposure to related opportunities, which can lead to material cost advantages, improved efficiencies and/or new revenue sources.

ESG ratings are, in addition, a possible lead indicator of management quality in that companies which are better managers of ESG factors may also be better managers of shareholder capital, Credit Suisse said.

Link between ESG and profitability

A new white paper from leading global index provider MSCI, Foundations of ESG Investing, evaluates how ESG characteristics can enhance portfolio performance.

MSCI is a leading global ESG researcher, with a team of over 170 analysts worldwide assessing all of the stocks in its global universe on a ‘AAA’ to ‘CCC’ scale according to their exposure to industry specific ESG risks and their ability to manage those risks relative to their peers.

In Part 2 of the white paper, Integrating ESG into Benchmarks, MSCI finds that two of its key ESG indices: MSCI ESG Leaders Index and the MSCI ESG Universal Index; enhanced risk reduction and led to better risk-adjusted returns compared to their parent index the MSCI All Country World Index (ACWI).

MSCI found that there was a clear reduction in all relevant risk measures for both of its ESG index methodologies, including: total risk or volatility; expected shortfalls; and maximum drawdowns, compared to the MSCI ACWI.

Other research backs these findings. In its study, A Quantitative Perspective of how ESG can Enhance your Portfolio, JP Morgan says the evolution within ESG investing means it now offers investors a measurement system to manage reputational and operational risk that companies face, which may impact on their long-term profitability. JP Morgan concludes:

ESG can enhance your portfolio by reducing volatility, increasing Sharpe ratios and limiting drawdowns … Our research highlights that the key attributes of ESG Investing lie within portfolio construction. While the return profile may not be the selling point, not having ESG factors in your portfolio significantly increases volatility, lowers potential Sharpe ratios and leads to a higher probability of suffering larger drawdowns during times of market stress” [3]

Indices and ETFs make it easy

MSCI is the world’s largest provider of ESG indices across both equities and fixed income with over US$170 billion benchmarked to MSCI ESG indices [4].

Swiss Re, one of the world’s largest reinsurers, shifted its entire investment portfolio worth around US$130 billion to MSCI’s ESG index family in 2017, choosing benchmarks that systematically integrate ESG criteria rather than traditional market benchmarks.

Guido Fürer, Group Chief Investment Officer at Swiss Re, explained his decision:

These benchmarks represent a suitable tool to achieve the desired investment behavior (sic) and set the right measurement both from a performance and ESG perspective… MSCI is a leader in providing ESG indices for institutional investors, helping them with their ESG integration needs. [5]

One of the world’s largest pension funds, The Government Pension Investment Fund for Japan (GPIF), also selected MSCI indices as benchmarks for their ESG investment strategy in 2017. [6]

In Australia, institutional investors have been at the forefront of sustainable or responsible investing. It is estimated that around $622 billion in assets under management (AUM) was invested through some form of responsible investment strategy in Australia as at 31 December 2016. This was up 9 per cent from $569 billion in 2015, representing around half of all assets professionally managed in Australia (44 per cent), according to the Responsible Investment Benchmark Report 2017 from the Responsible Investment Association Australasia (RIAA). [7]

According to the report, “the comparison of responsible investment funds against mainstream equivalent funds and their benchmark index indicates outperformance across the majority of time periods”. [8]

Investors committed to ESG and who want to align their investments to their ethics and values can therefore have confidence that their investment choices can improve their portfolio returns. On the other hand, ignoring ESG factors can cost investors real dollars, not just missed opportunities.

VanEck’s MSCI International Sustainable Equity ETF (ASX: ESGI) has recently been certified as an ‘Ethical’ investment product by the RIAA. Launched on ASX in March 2018, ESGI provides investors with access to a portfolio of around 174 true-to-label sustainable international companies in a single trade. The smart beta ETF tracks the MSCI World ex Australia ex Fossil Fuel Select SRI and Low Carbon Capped Index which screens companies based on fossil fuel ownership and revenues, socially responsible activities, environmental, social or governance (ESG) performance and carbon emissions.

1. P1 R. Gibson&P. Krueger (2017). The Sustainability Footprint of Institutional Investors. Swiss Finance Institute Research Working Paper No. 17-05, available at http://goo.gl/qzhvSC”.
2. Credit Suisse 2015, ‘Finding Alpha in ESG’.
3. JP Morgan 2016, ‘A Quantitative Perspective of how ESG can Enhance your Portfolio’
4. https://www.msci.com/documents/10199/df843280-e7ac-4876-a769-a1a53140546a
5. http://www.swissre.com/media/news_releases/nr20170706_MSCI_ESG_investing.html
6. https://www.msci.com/documents/10199/60420eeb-5c4e-4293-b378-feab6a2bf77f
7. P6, Responsible Investment Benchmark Report 2017 Australia.
8. P8, Responsible Investment Benchmark Report 2017 Australia, from the Responsible Investment Association Australasia.

By Arian Neiron, Managing Director

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Arian Neiron

Smart beta ETFs gained significant traction in the Australian market in 2016 as an alternative to active management and market capitalisation-weighted index funds, according to Arian Neiron, Managing Director, VanEck.

Total flows into smart beta ETFs reached A$563 million accounting for almost 20% of the total Australian ETP[1] flows of $3.06 billion[2] in the 12 months to December 2016. Smart beta ETFs attracted the majority (60%) of total ETP inflows in December alone.

“Smart beta strategies provide an alternative passive approach to traditional market capitalisation indices. There was considerable market volatility in 2016 and smart beta strategies, such as equal weight, quality, value and fundamental weighting, provided investors with the opportunity to achieve targeted outcomes and higher risk-adjusted returns,” Mr Neiron said.

At the end of the November 2016 total investment in smart beta equity ETFs/ETPs globally reached a new record of US$497 billion[3], across 1,179 smart beta equity ETFs/ETPs. Locally, smart beta ETFs account for 20% of the total ASX-listed ETPs.

“Globally smart beta is the fastest growing segment of the investment management industry. While still in its infancy, we expect Australia’s smart beta ETF industry to grow significantly in 2017 as investors understand the benefits of achieving targeted investment outcomes within a passive investment management framework. The number of smart beta ETPs will expand across a range of asset classes this year,” Mr Neiron said.

Overall, Australia’s ETP industry reached a record high at the end of 2016 of A$25.6 billion[4], a 20% growth from 2015. Total inflows into Australian equity ETPs in 2016 surpassed international equity ETP investment for the first time in several years. In the 12 months to December 2016 Australian equity ETP inflows reached A$1.04 billion exceeding international equity ETP inflows of A$967 million.

“Speculation leading up to the US election and ongoing market volatility particularly encouraged investors’ love affair with Australian equites in 2016. Investment into fixed income ETFs also picked up in 2016, attracting A$563 million (almost 20%) of total overall ETP flows, a significant increase from A$410 million in 2014. The search for defensive assets has been a dominant theme in 2016. Duration risk is top of mind for investors who have started shifting out of long-term bonds to short-term bonds in anticipation of rising interest rates in the US,” Mr Neiron said.

Gold miners ETFs and bullion ETPs also benefitted from uncertainty in 2016 attracting in excess of $100 million in the 12 months to December 2016. However, post the US election gold tapered off slightly as the Trump honeymoon led stock markets to full bloom.

“We believe the Trump administration has the potential to implement policies that promote growth. However, it seems the market is ignoring many potential risks the new administration may face. These include attempting to change trade treaties, immigration policies, the national debt and Fed tightening. Potential moves by China or Russia, disarray in the EU and strife in the Middle East could also impact the administration’s efforts. We believe many of these risks will surface in 2017, reversing the positive sentiment in the stock market and US dollar to gold’s benefit,” Mr Neiron said.

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Arian Neiron

During the past month Australian investors are preferring to invest in Australian equity ETPs and defensive asset classes such as cash, fixed income and gold over international equity ETPs.

Total inflows into Australian equity ETPs was almost double ($191 million) the investment in international equity ETPs ($101 million) in October[1]. Year-to-date Australian equity ETPs inflows ($959 million) surpassed international equity ETPs inflows ($891 million), reversing the trend of the last few years.

Arian Neiron, Managing Director, VanEck Australia said, “Australia’s ETP sector is a barometer of investor appetite. October inflows reflects Australian investors’ uncertainty in international equity markets and a strong home country bias, particularly in the lead up to the US election outcome this week and with continued speculation about a possible Fed rate hike at the end of the year.”

The total value of Australia’s total ETP industry declined slightly this month compared to the previous month, reaching a total of $23.9 billion in October. The industry attracted modest monthly inflows of $451 million, according to October’s ASX Funds Monthly Update.

Gold bullion and gold miners ETPs attracted just over $12 million in October and $73 million year-to-date indicating that gold is still attracting positive net flows.

“Gold ETPs are on a positive trajectory. No matter what the outcome of the US election is this week, market uncertainty bodes well for gold.Should the price of gold bullion rally after the election it will be positive for gold mining stocks as they have traditionally outperformed gold bullion when the bullion price rises.
“We believe gold bullion hasn’t yet reached its peak price and we expect to see gold continue to rally. This should be reflected in gold ETP investment as we move into 2017,” Mr Neiron said.
According to Neiron, investors are investing in sectors and strategies where they see pockets of opportunities or are seeking to improve the robustness of their portfolios. For example, investors are increasingly investing in smart beta ETPs to access investment strategies that offer targeted exposures.

“Smart beta strategies enable investors to achieve a targeted outcome by actively identifying a factor, or investment approach they want in their portfolio while enjoying index-like features. We expect this trend to continue into 2017 as advisers and investors gain greater understanding of and access to smart beta ETPs,” Mr Neiron said.

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Arian Neiron

Investors are increasingly investing in smart beta and active exchange traded products (ETP) to improve portfolio outcomes and navigate volatility in global and domestic markets according to VanEck.

Australia’s ETP industry reached a record high in August ending the month at $23.49 billion. The modest growth of $283m in August reflected investor’s ongoing risk aversion towards global markets. Almost 70% or $197m of total Australian ASX ETP assets was invested in smart beta and active ETPs in August.

Arian Neiron, Managing Director, VanEck Australia said, “Investors are recognising that alternative index approaches can provide improved risk adjusted returns or targeted outcomes. Smart beta indices, such as equal weighting, can address concentration challenges inherent in market capitalisation indices. Smart beta is the intersection between active and passive management seeking to achieve targeted investment outcomes at low cost.”

Not surprisingly, investors continued to favour defensive assets in August. Gold bullion and gold miners ETFs attracted $65m YTD and $25 million was invested in August, reflecting investors’ aversion to risk assets. Inflows into fixed income ETPs were also high, attracting $63 million in August.

“Investors are still concerned about the outlook of the current low growth and low rate global environment and the unintended consequences of central bank intervention. This is reflected in ETP flows. There was heavy investment demand for gold following the 2008 financial crisis and we are seeing a similar level of investment demand in 2016. This current activity in the gold markets indicates that investors have become more proactive, buying gold as a hedge against potential market turmoil.”

Despite modest flows into the ETP industry, product development was strong with 5 products launched in August across thematic and active strategies, taking total ETP products to 145.

“Product issuers understand that Australia’s ETP industry is relatively immature compared to the United States and other northern hemisphere markets, they are looking more at the long-term opportunities in Australia,” Mr Neiron said.

“Australia’s ETP market has plenty of room to grow, however given subdued investor confidence, we forecast the ETP industry will end the year at about $26 billion,” Mr Neiron said.

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