Although the shrinking of net assets position of ETFs was small, the month of August was notable in that money has moved between different funds revealing insights on investor behaviour:

Lower fee proposition may be enticing investors – Vanguard’s lower cost broad market product (tracking the S&P/ASX 300) saw an increase of approximately $11 million in contrast to State Street’s broad market product (tracking the S&P/ASX 200) which experienced net redemptions of approximately $15 million. Indicates investors may be drawn to cheaper index/ beta exposures.

Demand for A$ hedged gold surges – Of the two gold exchange traded products, BetaShares’ QAU, which holds physical bullion but is A$ hedged gold saw strong inflows of approximately $10 million while ETF Securities’ unhedged gold product (GOLD) product experienced net redemption of approximately $25 million, suggesting investors continue to demand gold exposure, but prefer it to be A$ hedged.

Precious metals activity points to investor fear – There continues to be strong trading activity in silver and gold exchange traded products which indicates investors continue to seek refuge from volatility in the markets by investing in physical metals.

Currency ETFs take a hit – Net outflows in currency products indicate investors are currently reluctant to take a view on a weakening AUD.

“While we have seen a slight contraction and small redemption of units in the ETF market across August, structurally the market looks set to continue to grow strongly.  In addition, looking beyond total market flows we see interesting signs of money moving between competing products indicating greater maturity being introduced into the ETF landscape,” said Drew Corbett, Head of Investment Strategy of BetaShares.

“Another point to note for August was the extreme market volatility. During turbulent times, average daily turnover of ETFs increased proving the depth of liquidity available for investors,” he said.

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