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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)
- 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
- 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.
- 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 decreased 17% for the month
- 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 $) – April 2019
|Fixed Income||$ 367,461,691|
|International Equities||$ 303,528,555|
|Australian Equities||$ 138,008,528|
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
Top sub-category inflows (by $) – April 2019
|Australian Bonds||$ 287,444,106|
|Australian Equities – Broad||$ 146,000,275|
|International Equities – Developed World||$ 143,133,834|
|Global Bonds||$ 80,017,584|
Top sub-category outflows (by $) – April 2019
|International Equities – Europe||($13,370,591)|
|Australian Equities – Geared||($9,299,740)|
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.