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.
- 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 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).
- 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 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.
- 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 (%)|
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||–|
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
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|
|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!