Strong positive flows were seen across the US, Europe and APAC, with Australia based ETFs receiving $368m in flows – improving on last month’s record inflow of $354m.

The increasing escalation in the Ukraine, ongoing tensions in the Middle East, Argentina’s latest default and concerns about the Federal Reserve’s intentions did not deter global ETF investors from investing heavily in equities in July. Of the US$35.5bn invested in ETFs across globe during July, 82% of these flows were to equity-based ETFs in July.

Looking a little deeper into recent trends, we can see that Emerging Market equities have seen a rapid return to favour with ETF investors adding heavily in Emerging Market equities for the 3^rd month in a row.  This follows a period of significant outflows from the asset class due to concerns around the evolving political landscape and Chinese reforms concerns.

Unlike their global peers, Australian ETF investors remained cautious on emerging market equities with cash outflows over July the largest over the last 12 months.

While global ETF investors clearly favoured the attractiveness of higher growth emerging economies in recent periods, we expect continued convergence of economic growth from advanced and Emerging Economies due to an improvement in the advanced world and a stabilisation of Emerging Economies. Our expectations are that the global economy will expand 3.5% in 2014 and 3.8% in 2015.

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The suite will comprise five risk-based models, ranging from high growth to conservative, and a flexible asset allocation model that incorporates a cash-plus approach with a focus on capital preservation when volatility occurs.

Mark Wills, head of SSgA Investment Solutions Group for Asia Pacific ex Japan, said: “Tactical asset allocation is increasingly gaining traction in Australia, which in turn is fuelling retail investor appetite for model portfolios that employ tactical asset allocation.

“SSgA has more than 20 years of experience designing asset allocation strategies for institutional investors. We build customised investment portfolios based on specific objectives for many of the world’s biggest institutions. With this new ETF model portfolio approach we are able to give retail investors access to this asset allocation expertise, implemented in a cost-effective, transparent way using ETFs.”

OneVue head of partner solutions Brett Marsh said having formed a strategic partnership with an ETF issuer as experienced as SSgA was a particularly pleasing feat for OneVue.

“SSgA created the first ETF globally, the first ETF domestically and currently holds the biggest share of the ETF market in Australia,” Marsh said.

“This partnership enables OneVue’s client base to leverage SSgA’s global and domestic expertise and capabilities in asset allocation, and gives clients access to model portfolios comprised of SPDR^® ETFs in addition to ETFs offered by other leading issuers.”

The suite of Australian-listed ETF model portfolios are tailored specifically for OneVue by SSgA and offer exposure to cash, domestic fixed income, domestic equities, international equities and alternatives. SSgA will advise on the asset allocation for the models, regularly reviewing the strategic allocation to ensure alignment to the stated objectives, while dynamically shifting allocations in response to significant market events. The exposure to each asset class is implemented via exchange traded products, including SSgA’s range of SPDR ETFs.

Mr Marsh continued: “In the near future these models will also become available on OneVue’s wealth management portal for organisations that cater to the self-directed market and will be an easy way for investors to diversify their portfolio in a flexible, tax effective and low cost manner,” Marsh said.

“We recognise that the adoption of ETFs continues to increase both in the advice and self-directed sectors, with the exchange traded product market reaching a record $8.8 billion in assets, according to the latest ASX Funds Monthly Update.

“ETFs provide an entry point to sectors that are more difficult to access in the Australian marketplace, for instance international markets, and they offer greater transparency as it’s possible to know precisely which securities the ETF holds daily.”

Marsh added that the addition of this suite on OneVue’s menu means advisers can tap into the skill set of qualified investment managers, while at the same time removing the challenge for direct investors in terms of what companies to pick, how they go about doing it and ways they can get exposure to different asset classes.

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The rating reflects a combination of very low direct and indirect costs, a highly liquid secondary market, a simple and transparent portfolio-construction approach and historical performance that has been very true to style. 

The manager State Street Global Advisors Australia Ltd. designed the exchange-traded fund (ETF) product to closely track the returns of the S&P/ASX 200 Accumulation Index. Specifically, consistent with this objective, STW uses a full-replication portfolio-construction method, with the fund holding each of the 200 constituents stocks of the benchmark at market weight. 

Additionally, STW has proven, and will likely to continue to be, a highly tax-efficient investment vehicle. In a comparative sense, it may generate superior after-tax returns for investors with anything other than a zero percent marginal tax rate. 

S&P Fund Services analyst Rodney Lay said: “STW represents a highly efficient vehicle to gain exposure to the broader Australian equities market, and it is the only domestically listed ETF that provides exposure to the S&P/ASX 200 Accumulation Index”.

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Australia’s flagship ETF, the SPDR® S&P®/ASX 200 Fund (STW), enjoyed high liquidity and tight spreads throughout the recent market turmoil and closely tracked the index net asset value, despite the extreme volatility.

Frank Henze, Asia Pacific Head of ETFs at SSgA said “One of the key benefits of the SPDR S&P/ASX 200 Fund is its liquidity, allowing it to be traded at such a tight bid/ask spread. Last week we saw trading in the fund increase by up to 1000 percent. 4.5 million STW units were traded throughout the week ensuring investors were able to trade when they most wanted to do so.

“As a result of this high liquidity the fund was able to maintain a very tight spread. On Tuesday August 9, one of the most volatile days, the average spread on the fund was just 6bps compared to spreads of between 20bps and 27bps for other similar ETFs.

“The key benefits of ETFs are transparency, simplicity and value for money and the fund exhibited precisely these characteristics during the recent turmoil.”

Mr Henze said despite the concerns in the markets last week the high volumes did not represent investors selling out.

“One might assume that investors were simply getting out of ETFs last week given the fears that were prevalent at the time. However our data shows investors were using ETFs to gain exposure to the equity market in equal measure.

“There were no net redemptions during the week and in fact on one of the most volatile days we saw a significant temporary creation, indicating many investors saw the fund as an efficient way to gain market exposure.”

The SPDR S&P/ASX 200 Fund also gave investors accurate exposure to the Australian benchmark.

“Despite the highest equity market volatility since the GFC the fund accurately mirrored the market ups and downs, with performance of the fund deviating from the index by no more than 0.01 percent,” added Mr Henze.

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