Alex Vynokur

The growth of the Australian exchange-traded fund market continued in August to reach a new record high of $12.4B in assets under management according to the BetaShares Australian ETF Review – August 2014.

Total funds under management increased by around $200 million, the growth particularly striking as it was almost entirely attributable to new money flows during a month in which the Australian share market did not grow at all.

In what has been a recurring theme in the industry , investors continued to be attracted to high yielding Australian equities, with that product sector receiving the highest level of inflows for the month, with the BetaShares Equity Yield Maximiser managed fund (YMAX) receiving the largest amount of inflows in that category. ETFs focusing on broad Australian equities were also well supported.

In a month in which Australian stocks performed in a lacklustre fashion, the exchange traded products which delivered the best returns to investors were those that focused on natural gas and emerging markets equities.

“ETFs provide a convenient way to build sensibly diversified portfolios that include a wide range of asset classes. Their attraction is independent of the fluctuations in the Australian share market. As it happens, though, many ETF investors continue to seek yield – as they have done for much of the last year,” Mr Vynokur said.

Looking ahead, Mr Vynokur noted that that the growth in funds under management was expected to continue. “The recent development of the ETF market suggests that larger numbers of investors are becoming involved, investing money into established products. We expect continued inflows into existing products, however, we additionally expect industry growth to be assisted by new and innovative investment solutions that are anticipated to become available on the ASX through the last four months of 2014.”

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Alex Vynokur

The growth of the Australian exchange-traded product (ETP) market accelerated in July to break through $12B in assets under management, reaching a new record high of $12.2 billion, according to the BetaShares Australian ETF Review – July 2014.

Funds under management increased by over $500 million – or 4.6% – during the month; driven by $300 million of new net inflows as well as the strong performance of Australian and global stock markets in July.

Alex Vynokur, Managing Director of BetaShares, said: “The rise in funds under management of about $500 million over the course of July needs to be considered in the context of the increase through the first half of 2014, which was $1.7 billion. The rate of growth has accelerated.”

Local investors are increasingly realising that ETFs provide access to diverse asset classes, and not just Australian equities. During July, developed global equities was the sector that received the most inflows – more than $130 million. Cash and high yield equities were the next most supported sectors.

The most popular product by inflows in July was the BetaShares Australian High Interest Cash ETF (AAA), which has been the product experiencing the highest level of inflows in the calendar year to date.

 “Several trends are evident,” Mr Vynokur said. “As was the case through the first half of the year, investors continue to seek yield. It is also likely that some investors saw the general softness of stock markets outside Australia during July as a buying opportunity. Most crucially, though, investors are increasingly using ETFs as a flexible and cost effective solution to diversify their portfolios across different asset classes.”

As the attractiveness of ETFs is becoming more widely recognised, the trading values are increasing. Trading value increased by 19.2% in July relative to June – representing the highest level of ETF trading (by value) for 12 months.

Looking ahead, Mr Vynokur noted that that the growth in funds under management was expected to continue. “Over the last few weeks, we have seen the pace of expansion accelerate, and this has been largely driven by increased investment in existing products. Looking forward, we anticipate that this growth will be bolstered as new and innovative products are brought to market through the remaining months of 2014.”

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Alex Vynokur

The Australian exchange traded product (ETP) industry set another record high as total assets for the industry grew approximately 3% this month to $11.4 billion, an increase of $354 million, according to BetaShares Australian ETF Review for May 2014.

Importantly, almost 70% of the growth was attributable to new money flows, not asset price increases, suggesting new investors are continuing to add ETPs to their investment portfolios. May also represents the fourth consecutive month where new money inflows were greater than $200 million.

“The last four months inflows exceeded the total amount of new money raised by the industry during the 2012 calendar year. The increased level and consistency of inflows during recent months reinforces the notion that ETPs have become an increasingly mainstream vehicle to implement investment decisions,” said Alex Vynokur, Managing Director of BetaShares.

Despite investors continuing to adopt ETPs, the industry welcomed only its third new fund for 2014 with the first geared fund launched on the ASX during May. This compares with the last two calendar years where a total of 36 new products were launched.

“We have seen product growth momentum slow recently indicating a maturing market with all core asset classes now available on the ASX. However, we still believe there are product gaps to fill for Australian investors when compared with more developed international markets and believe this slower product growth is only temporary,” said Mr Vynokur.

May inflows were strong across a broad range of domestic equities products, high yield and the Cash ETF. Net outflows were limited this month and primarily involved selling out of emerging markets equities exposures which were also the best performing products in May.

“We are beginning to see a greater level of sophistication among investors using ETPs. This month saw profit taking in emerging markets ETPs after prices rallied during the month, which challenges a false perception that ETPs are “buy and hold” investments only,” he concluded.

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Alex Vynokur

Australian exchange traded fund investors are favouring defensive cash and yield-oriented funds, with approximately $135 million flowing into these products in April, according to the monthly BetaShares Australian ETF Review.

Another record month saw the Australian exchange traded product (ETP) market break through the $11 billion barrier in funds under management at the end of April. The market grew by 4.3% in the month, and has now grown approximately 50% over the last 12 months. Total monthly market growth amounted to $452 million with approximately $300 million of growth coming from new money inflows.

Highlighting investor appetite for yield, Australian high yield equities products were the most popular product category by inflows during April, while the top individual product for net inflows was the Cash ETF.

“Exchange traded products in Australia are increasingly becoming mainstream, with assets under management expanding rapidly. Growth is being driven by an increase in confidence around global markets as well as familiarity by investors with exchange traded funds. Growth continues to be strongest in domestic and international equities, high yield and cash oriented products,” Mr Vynokur said.

Net outflows were virtually non-existent in April, with small outflows recorded in gold exposures.

“ETPs make it easy for investors to access a range of targeted exposures, and to implement portfolios strategies consistent with their views on the market. April’s outflows were minimal suggesting a bullish sentiment towards exposures across most asset classes,” said Mr Vynokur.

In terms of performance, two of the top five products for the month were commodities based while A-REITs also rallied.

“Commodities-based exposures have consistently been amongst the best performing asset class each month this year to date, despite trading activity in these funds being low. This suggests investors are missing out on potential opportunities available from the commodities asset class,” he concluded.

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Alex Vynokur

The Australian exchange traded fund (ETF) market continued to break new ground in March, reaching a record high of $10.5 billion in funds under management, according to the BetaShares Australian ETF Review.

Approximately $200 million of new money flowed into exchange traded products in March, with inflows coming almost exclusively from new money rather than existing asset growth. Total industry market capitalisation increased by 2% over the month.

In a reversal of market trends from previous months, a significant number of investors exited Australian equities, with approximately $40 million flowing out of funds offering these exposures – a sign that investors are cautious about the local equities market.

The two products experiencing the highest inflows for the month were the Australian High Interest Cash ETF and Equity Yield Maximiser fund, indicating investor demand for defensive and high-yielding strategies. Indeed, four of the top five categories by inflows this month were yield oriented further exemplifying investors’ defensive positioning.

“Last month’s flows indicate that investors are showing some caution in regard to the Australian equities market. However, due to the variety of strategies available via exchange traded products, investors have been able to continue to express their investment views beyond simple broad-based equities exposures,” said Alex Vynokur, Managing Director of BetaShares.

“With investors potentially feeling unsure about the future direction of the local equities market, many are taking the opportunity to construct a more defensive portfolio, incorporating cash and yield-focused strategies to guard against potential market volatility.”

In terms of performance, products offering agriculture exposure provided the best returns, particularly due to continued uncertainty on the future supply of soft commodities, given the effects of the United States droughts.

“The best performing exposure each month this year to date has been commodities-based and highlights the value of the asset class in building a diversified portfolio, especially during times of equity market volatility,” said Mr Vynokur.

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Alex Vynokur

The Australian exchange traded fund (ETF) market recommenced its growth path in February, reaching a new record high of $10.3 billion in funds under management, according to the BetaShares Australian ETF Review.

Industry market capitalisation grew by 5% over the month, and around $235 million of new money flowed into exchange traded funds. Another positive trend this month was increasing trading activity – with trading value growing 10% over the previous month.

Over half of total inflows (approximately $160m) went into Australian equity exposures with a majority of the remaining money going to international equities, particularly European markets. Interestingly however, not all the inflows this month were bullish – the BetaShares Australian Equities Bear Hedge Fund (ASX code ‘BEAR’) also entered the top five funds by inflows for the first time in several months, indicating investor caution around continued growth in local equities markets.

“Despite overall positive inflows to domestic equities this month, we saw a significant upswing in the number of investors protecting downside risk in their portfolios or taking a position to profit from a downturn in the Australian market using the Bear Fund,” according to Alex Vynokur, Managing Director of BetaShares.

One of the benefits of ETFs is that they allow investors to easily obtain lower cost, liquid and transparent exposure to a broad range of asset classes. For example, the best performing products for February were those offering commodities exposures including agriculture, silver and gold. Returning from market lows, currency hedged gold also rallied this month as geopolitical risk caused uncertainty in global markets.

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Alex Vynokur

In a rare occurrence over the last two years, the Australian exchange traded fund (ETF) market contracted during January after a remarkable 20 consecutive months of growth as assets under management dropped slightly to $9.8 billion according to BetaShares’ ETF Review for January.

While assets under management decreased, this drop was wholly attributable to negative market movements, and, in fact, the industry received positive new money inflows for the month of approximately $150 million. Two-thirds of this month’s inflows (approximately $100m) were into Australian equity exposures with a majority of the remaining money going into European equities exposure.

Alex Vynokur, Managing Director of BetaShares said: “Despite the drop in overall funds under management this month, units on issue grew by 1.2% suggesting investor appetite remains buoyant despite recent volatility in the markets.”

Net outflows for January were small with the majority coming from unhedged gold, with investors taking the opportunity to exit as the price of gold increased approximately 7% for the month.

“Products providing commodities exposure were the strongest performing products for the month as the domestic and international bourses across the world took a breather. Despite equity markets being volatile, ETFs provide investors access to other asset classes such as commodities and currencies to develop a diversified portfolio with the potential to outperform across a variety of market conditions,” he said.

One new exchange traded product began trading during January bringing the total number to 90. The product enters a crowded Australian equity high yield segment which received $500 million of inflows in 2013.

“Competing products in a single sector signal a maturing industry, which is beginning to mimic the more developed ETF markets in Europe and the United States,” Mr Vynokur concluded.

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ETF market scaling new heights.

The Australian exchange traded fund (ETF) market continued its 18^th consecutive month of growth in November, reaching a new record high of $9.6 billion in funds under management, according to BetaShares’ November ETF Review.

ETF industry assets grew 3.2% ($297 million) in November with the bulk of the growth ($210 million) attributable to new money rather than market performance.

The trend towards international equities ETFs continued this month with all four new products launched in November offering these exposures. This trend was mirrored in terms of fund inflows, with $85 million flowing into international equities ETFs over the month.

Alex Vynokur, Managing Director of BetaShares said: “With the US and European markets continuing to show signs of recovery, investors are continuing their bullish stance on international equities and this is being reflected in this month’s ETF flows.”

All of the top three products in terms of inflows during November were also international equities ETFs, further reflecting local investors’ confidence in global markets.

Meanwhile, sentiment towards the local equities market also continued to rebound, with high levels of inflows into ETFs that offered Australian share exposures. Australian equities recorded the most inflows in November ($88m), reversing a four month trend where international equities were the most popular product category.

“Inflows into Australian equities are beginning to feature strongly as we come to the end of the year, and investor confidence in the local market grows off the back of international recovery,” said Mr Vynokur.

“It’s been an extraordinary year for the ETF market as a whole, with strong ongoing growth notwithstanding lower numbers of new product launches compared to previous years. We expect to see this positive trend continue for the last month of the 2013 as we move closer towards the $10 billion milestone,” Mr Vynokur concluded.

Click here to view the BetaShares Australian ETF Review for November 2013.

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BetaShares Australian ETF Review September 2013: ETFs nearing $9bn

The Australian exchange traded fund market hit a fresh record high of $8.9 billion in assets under management, as market capitalisation grew by $138 million during September, according to BetaShares’ Australian ETF Review for September.

While the pace of growth was slower than previous months, September marks the 16^th consecutive month of positive growth for the industry.

There was a strong US-theme this month with US equities and US Dollar currency exposures being amongst the most popular in terms of net inflows. Investors continued to seek out cash however, with inflows into the Australian High Interest Cash ETF being the second highest category for net inflows.

Alex Vynokur, Managing Director of BetaShares said: “ETF inflows suggest investor appetite has not dampened for US exposures despite concerns around the  US debt ceiling, with investors adding both US equities and the US Dollar currency to their portfolios.”

Despite the bullish sentiment towards international equities, investors continue to favour cash. In addition, in a more distinct sign of negative sentiment, the BEAR fund, designed to go up when the market goes down and vice versa, entered the top 10 funds by net inflows this month for the first time in 2013.

“The exchange traded product flows for September shows that not all investors are willing to take on risk assets. While on the one hand money is still flowing into international equities, there is also another part of the market that is looking for the capital stability of cash or even taking a view that the market is potentially due for a correction and using the BEAR fund to hedge portfolios or to profit from a market decline,” he said.

The best performing products for the month were global equities and Asian country ETFs.

“It was not surprising to see Asian equities ETFs rebound in September with many emerging markets performing poorly in August as investors moved capital back to developed economies such as the United States.

“The power of ETFs lies in their ability to provide access for investors to take a view across multiple asset classes and strategies. As the industry continues to mature, ETF flow information is increasingly becoming relevant as a gauge for investor sentiment,” Mr Vynokur concluded.

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BetaShares Australian ETF Review August 2013

Trading values in the Australian exchange traded fund (ETF) industry hit record highs in August, demonstrating a ‘coming of age’ for the industry as investors increasingly use the products for tactical and strategic purposes.

According to the BetaShares Australian ETF Review for August 2013, the value of ETF trading in the local market reached $1.2 billion over the month, or an average value of $56m a day. This represents a 40% increase from the previous month’s trading figures – and a 128% increase compared to the same period last year.

“The latest figures reveal increased sophistication in the way investors are using ETFs in their portfolios”, said Alex Vynokur, BetaShares’ Managing Director. “While ETFs continue to be used by many investors as long-term ‘buy and hold’ investments, others are realising that they can take advantage of the unique structure of ETFs to make tactical allocations to particular sectors or asset classes.”

Along with the record trading figures in August, the industry also hit a fresh record high for the eleventh consecutive month to reach $8.71bn in assets under management. Assets under management increased by $456 million with almost 75% related to new inflows (i.e. structural industry growth), rather than market capitalisation growth.

This month, the segment to receive the highest level of inflows was developed international equities with investors continuing to be bullish on the US economic recovery. However, there was a substantial increase in inflows into other developed markets suggesting investors are also looking at potential recoveries in other regions such as Europe.

“ETFs provide an excellent guide to investor sentiment, and as evidenced by this month’s inflows and trading values, we’re clearly seeing an increasing amount of activity supporting the economic recovery in developed markets with a tilt towards US and Europe,” he said.

Additionally, yield remains a focus for Australian investors, being the second most popular product class in terms of inflows. Additional trading themes also revealed a continuing increase in gold ETF redemptions, despite the rally in gold prices – a likely indicator that investors are skittish about the possibility of quantitative easing coming to an end in the US.

“Gold continues to be out of favour with investors but has actually been one of the best performing asset classes on the ASX for the last two months, continuing to reverse the April price slide.” he said.

Commenting on the broader exchange traded fund sector, Mr Vynokur said: “In January, we predicted the exchange traded products sector to end the year with $9 billion in assets under management. It is only August and we are just shy of that number with growth exceeding our expectations. We now believe the Australian market will finish the year at $10 billion.”

Click here to download the BetaShares Australian ETF Review for August 2013.

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