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FIXATED ON FIXED INCOME AS INDUSTRY APPROACHES $50B MILESTONE
- The Australian ETF industry started the second quarter of 2019 where the previous quarter finished, with strong monthly growth which led the industry to once again hit a fresh record high, just shy of the milestone $50B mark.
- The industry ended April at a record $48.0B with its market cap increasing by a robust 4.1%, with $1.9B being added to the industry – the third highest $ growth on record (the record of $2.3B was achieved in February this year).
- While the overall positive performance of global sharemarkets did contribute to the fast growth, >50% of the industry’s growth came from net new money into the industry, a total of $994m
- After a quiet quarter for product growth, we saw 2 new products launched this month – a global REIT and global multi-factor ETF. We predict the rest of the year will continue to be marked by product launches, and expect this activity to accelerate particularly in the second half of 2019.
- One of the most notable trends we saw this month was strong investor demand for Australian fixed income & cash ETFs, which were the largest categories for net inflows this month (~$467m combined), reflecting a more defensive positioning by investors in their portfolios notwithstanding strong equity market returns over the first quarter of the year. The strong interest in fixed income was mirrored globally as I have discussed in our quarterly global ETF review released this month.
- The BetaShares Australian High Interest Cash ETF (ASX: AAA) was the #1 product for net inflows this month with ~$95m of new money added.
- Technology oriented ETFs, particularly those providing access to the Global Robotics & Artificial Intelligence sector, were the best performers followed by the BetaShares Geared U.S. Equities Fund (hedge fund) (ASX:GGUS)
Market cap
- ASX Exchange Traded Funds Market Cap: $48.0B – New industry record
- Market cap increase for month: 4.1%, +$1,882M – 3rd highest monthly increase on record
- Market cap growth for last 12 months: 27%, + $10.1B
New money
- Unit growth for year (by number): +1.8%
- Net new money for month: +$993.6m
Comments: While the performance of sharemarkets was a significant contributor to the growth of the ETP market this month, the majority of growth came from new money.
Products
- 243 Exchange Traded Products trading on the ASX – 2 new products launched, a global REIT product from VanEck and an Active Global Multi-Factor fund from Vanguard
Trading value
- Trading value decreased 17% for the month
Performance
- Top performing products this month were Technology-oriented products, including Global Robotics & A.I, as well as Geared U.S. Equities as provided by the BetaShares Geared U.S. Equities Fund (hedge fund)
Comments: Technology-oriented products performed well globally, with the BetaShares Global Robotics & A.I. ETF returning 8.2% for the month.
Top 5 category inflows (by $) – April 2019
| Category | Inflow Value | |
| Fixed Income | $ 367,461,691 | |
| International Equities | $ 303,528,555 | |
| Australian Equities | $ 138,008,528 | |
| Cash | $ 104,889,190 | |
| Multi-Asset | $ 58,520,365 | |
Comment: Fixed Income and Cash inflows remained strong in April, as investors continued to strengthen their defensive positions in their portfolios in anticipation of a market decline. Meanwhile, International Equities also saw significant flows in response to positive global market performance.
Top category outflows (by $) – April 2019
| Category | Outflow Value | |
| Commodities | ($ 16,154,554) | |
| Currency | ($ 9,494,904) |
Top sub-category inflows (by $) – April 2019
| Sub-Category | Inflow Value | |
| Australian Bonds | $ 287,444,106 | |
| Australian Equities – Broad | $ 146,000,275 | |
| International Equities – Developed World | $ 143,133,834 | |
| Cash | $ 104,889,190 | |
| Global Bonds | $ 80,017,584 | |
Top sub-category outflows (by $) – April 2019
| Sub-Category | Outflow Value | |
| International Equities – Europe | ($13,370,591) | |
| Currency | ($9,494,904) | |
| Australian Equities – Geared | ($9,299,740) | |
| Gold | ($8,394,293) | |
| Oil | ($7,678,983) | |
Comments: Notwithstanding the large flows into International Equities in April, European Equities were sold off, remaining consistent with the theme we have seen throughout 2019.
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!