BetaShares Australian ETF Review - 2018 in Review | BetaShares

BetaShares Australian ETF Review – 2018 in Review

BY Ilan Israelstam | 29 January 2019
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Salmon swimming upstream

Shaken, not stirred!

Despite dramatic sharemarket volatility throughout 2018, the Global ETF industry recorded significant growth over the year, reaching its 2nd highest level of net inflows ($US516B) and maintaining the positive growth trend. The Australian ETF industry ended the year with funds under management (FuM) of ~$41B – just shy of the record $42B, achieved in September. Read on for the key stats and figures for the year in ETFs.

Market cap

  • ASX Exchange Traded Funds Market Cap: $40.8B 
  • Market cap growth for year: +13%, +$4.8B

Comment: The exponential up-trend in ETP Market Cap has slightly flattened over 2018, however, given that this was entirely the result of asset value depreciation, we predict that this will recover and continue to move upwards in 2019. 

New money

  • New unit growth for year (units outstanding by number): 21%
  • Net new money (units outstanding by $ value): +$6.2B – 2nd highest annual flows on record

Comment: As a result of sharp market falls at year’s end, 100% of the industry growth came from net inflows. The strong unit growth means that if and when asset prices recover, we believe there will be some ‘bumper’ growth months in the year ahead. Flows by ETF manager continued to be concentrated, and more so than last year, with the top 2 players (Vanguard and BetaShares) receiving 62% of the industry’s flow combined (compared with 56% for the top 2 players in 2017).

Products

  • 247 Exchange Traded Products trading on the ASX
  • New products: 38 new products launched in the year (vs. 31 in 2017), 7 products closed/matured

Comment: 2018 produced the 2nd highest number of new product launches on record, with 38 funds launched – compared to 31 new products launched in 2017 and 40 in 2016. 

Trading value

  • Trading value increased 14% compared to 2017 – a big trading year for ETFs with $36B traded – reaching a fresh record high

Comment: We expect trading values to continue to trend upwards, as ETFs become an increasingly mainstream way to express investment views.

Performance

  • Palladium, Geared U.S. Dollar and Technology exposures, were the best performing products for 2018

Analysis of inflows

Product Style Inflow Value 2018 (%) 2017 (%) 2016 (%)
Index $4,883,379,845 78% 79% 67%
Active $770,196,731 12% 13% 21%
Smart Beta $578,511,389 9% 8% 11%

Comment: The increased share of flows into Active ETFs is notable and we do believe will edge up over time as more of these types of products are launched. Indeed, Active ETFs outsold ‘smart beta’ ETFs in 2018 which themselves were slightly up in terms of the share of flows compared to 2017.

Top 5 category inflows (by $) – 2018

Category                                                          Inflow Value Change in rank v 2017
International Equities $ 2,899,669,738
Australian Equities $ 1,492,522,567
Fixed Income $ 1,303,236,081
Multi-Asset $ 283,997,815 +8
Cash $ 229,152,702 -1

Comment: Compared to 2017, the ranking of inflows into high level categories were relatively similar. We expect International Equities exposures to continue to drive the ETF industry for some time to come, and would additionally not be surprised to see Fixed Income ETFs outsell Australian Equities exposures in 2019. One notable trend was the growth of multi-asset products, which we believe should continue to grow strongly going forward.

Top category outflows (by $) – 2018

Category                                                          Outflow Value
Currency ($174,213,824)
Short ($34,123,205)

Comment: Very low outflows recorded by category again this year, with the two categories that did receive net outflows likely doing so due to profit taking by investors. 

Top sub-category inflows (by $) – 2018

Sub-Category                                                          Inflow Value Change in rank v 2017
International Equities – Developed World $ 1,810,617,753 +1
Australian Bonds $ 1,205,732,313 +1
Australian Equities – Broad $ 944,973,977 -2
Multi-Asset $ 283,997,815 +6
International Equities – Asia $ 281,348,280 +8

We believe the industry will continue to grow strongly in 2019 – and forecast total industry FuM at end 2019 to be in the range of $50-55B . Read our 2019 predictions article and stay tuned for our monthly ETF review throughout the year!


 

4 Comments

  1. John Hopkins  |  February 18, 2019

    Why are investors putting more money into ETFs like BETA shares YMAX when average stock price has come down from over 11 to around eight? Yes, dividends are pretty good, but capital depreciation hurts.

    1. Gavin Montgomery  |  March 4, 2019

      Hi John,

      Thank you for your enquiry and a great question. YMAX may seem more attractive for investors seeking a solid and more frequent distribution. Yes, YMAX has shown a slow rate of decay since it’s inception due to the market environment which it has been operating within (bull market). However, YMAX’s strategy can be expected to outperform in a flat or falling market. Investors may be banking on the idea of a potential change in the market environment.

      If you did have any further enquiries, you are welcome to either email us at info@betashares.com.au or call us on 1300 487 577.

      Thanks,
      BetaShares Client Services

  2. Jeremy  |  February 25, 2019

    Hi,

    I was wondering what is your datasource for the net new money figures and top 5 category inflows for 2018?

    Is it possible to get access to the historical raw data prior to 2018?

    cheers,
    Jeremy

    1. Gavin Montgomery  |  March 11, 2019

      Hi Jeremy,

      Could you just specify what years and what specific data you are seeking.

      Kind Regards,

      BetaShares Client Services

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