BetaShares Australian ETF Review | Half Year 2018 | BetaShares ETFs

BetaShares Australian ETF Review – Half Year 2018

BY Ilan Israelstam | 18 July 2018
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Industry ends the financial year on a high 

It has been another strong half for the Australian ETF industry in the first six months of 2018. The industry’s funds under management increased 9% for the half to end the financial year at a new record high of $39.2B, with the industry growing FuM by $3.2B. Read on for details of the month in ETFs.

Market cap

  • ASX Exchange Traded Funds Market Cap: $39.2B – new record high
  • Market cap growth for month: 9%, + $3.2B
  • Market cap growth for the last 12 months: 33%, + $9.8B

New money

  • New unit growth for month (units outstanding by number): 12%
  • Net new money (units outstanding by $ value): +$2.7B

Comment: The vast majority of the industry’s growth (~84%) came from new inflows, rather than asset appreciation. Interestingly this is almost exactly the same amount of new money received by the industry for the first half of 2017.

 Products

  • 231 Exchange Traded Products trading on the ASX
  • New products: 10 new products launched in the half year, 5 products closed

Comment: Notably, in June, we saw iShares close 5 ETFs which is the largest product closure event in the industry’s history to date (by FuM). Once again, we view this as an indication of industry maturity and is far more common in more developed ETF markets such as the US and Europe

Trading value

  • Average trading value decreased 5% compared to the previous half year period

Performance

Top 5 category inflows (by $) – YTD

Category                                                          Inflow Value
International Equities $1,390,267,748
Australian Equities $567,044,249
Fixed Income $463,508,873
Multi-Asset $109,325,290
Cash $106,778,003

While 2017 saw Australian and International equities receiving the lion’s share of flows, 2018 so far has very much been about International Equities, which received ~2.5x the flows of Australian equities exposure for the half. Encouragingly, Fixed Income ETFs continue to receive allocations, and this is an area we expect to continue to grow as more investors seek to create balanced portfolios using ETFs alone.

Top category outflows (by $) – YTD

Category                                                          Inflow Value
Currency ($41,310,971)

The only outflows we saw at a high level category level was currency ETFs, as investors sold off primarily the USD ETF, which performed strongly for the half as the AUD continued to depreciate.

Top sub-category inflows (by $) – YTD

Category                                                          Inflow Value
International Equities – Developed World $748,451,933
Australian Bonds $428,499,747
International Equities – Sector $238,931,663
Australian Equities – Broad $135,241,829
Australian Equities – Ethical $130,945,349

Comment: Breaking down the broad categories into sub-categories provides a more nuanced view on where the money flows went so far this year. For example, looking at sub-category inflows we see that after Developed World equities it was Australian bond exposures that received the highest level of inflows. In addition, the fact that Australian Equities – Ethical (primary via FAIR) received almost as much net flow as broad Australian equities is notable and a sign of the increased attention investors are paying to socially responsible investment exposures.

Top sub-category Outflows (by $) – YTD

Category                                                          Inflow Value
Currency $41,310,971
Australian Equities – Financials Sector $11,565,911
Oil $6,215,200

Given the growth of the industry to date, we maintain the forecast we made at the end of 2017 and expect total industry FuM at the end of 2018 to be in the range of $47-$50B.