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AUSTRALIAN EQUITIES DOMINATE FLOWS & SHORT EXPOSURES DOMINATE TRADING
In what will go down as one of the most volatile periods in sharemarket history, Australian investors turned to exchange traded products in record numbers in the first half of 2020. Due to falls in asset values, the industry’s funds under management had a more muted increase of 6% for the half to end the financial year at $65.8B – a touch below the $66B record figure achieved at the end of January 2020. Read on for more details.
Australian ETP Market Cap: 2001 – June 2019
Source: ASX, BetaShares
Market cap
- ASX Exchange Traded Product Market Cap: $65.8B
- Market cap growth for half year: 6%, +$4.0B
- Market cap growth for last 12 months: 29%, + $14.9B
New money
- Net new money for half year: +$8.3B (90% growth compared to $4.4B in first half 2019)
Comments: The drop in asset values was more than made up by record inflows into the industry, with net new money for the half year of $8.3B. This represents an increase of 90% from the first half of 2019, where net flows were $4.4B, and is 3x the amount of money that entered the industry in the first half of 2018 ($2.7B).
Products
- 243 Exchange Traded Products trading on the ASX – 10 new products launched in the half year, 16 products matured, 9 products closed
Comments: Product development activity remained robust in the first half of 2020, with 10 new products launched. With the industry becoming increasingly competitive, and given the concentration we are seeing in terms of flows, we would not be surprised to see more consolidation in the industry over time.
Trading value
- Increase in trading value of 88% from previous half-year period as trading values ‘broke out’ to new levels in March 2020, with sustained high trading values in April, May and June
Comments: Like most markets around the world, post March we saw tremendous amounts of trading in the Australian ETF industry. In particular, geared-short exposures were traded in high volumes, with BBOZ receiving a great deal of attention from investors looking to profit from, or protect against, a falling Australian sharemarket. Showing that there are always two sides to every trade, we also saw our GEAR fund traded heavily.
Performance
- Best-performing exposures for the half-year were Chinese and Asian Equities exposures and Gold Miners.
Inflows (by $) – YTD
| Type of Exposure | Inflow Value | % |
| Index | $7,144,839,292 | 86% |
| Smart Beta | $660,987,673 | 8% |
| Active | 540,895,683 | 6% |
Comments: Passive index products took in the vast majority of flows for this half-year, and remains the dominant category by a very wide margin. Its share has grown at the expense of other categories (2019 flows into passive index exposures were 79% of total). In a similar vein to last year, we are seeing approximately equal flows between smart-beta ETFs and active products, with both these categories remaining relatively muted so far this year.
Top 5 category inflows (by $) – YTD
| Broad Category | Inflow Value |
| Australian Equities | $3,532,524,634 |
| International Equities | $2,075,197,284 |
| Commodities | $981,736,089 |
| Short | $768,012,841 |
| Fixed Income | $263,744,245 |
Comments: The first half of 2020 has shown a complete reversal of the flow picture by category, with fixed income flows very slow compared to equities, and with Australian equities rocketing up the charts in terms of investor demand and receiving a full $1.5B more flows than the 2nd-most demanded category, international equities. We have also seen significantly more flow into commodities ETFs, particularly gold bullion and oil exposures.
At a broad category level, we have seen no outflows, with all major categories receiving some level of inflows this year to date.
Top sub-category inflows (by $) – YTD
| Sub-Category | Inflow Value |
| Australian Equities – Broad | $2,712,364,535 |
| International Equities – Developed World | $1,063,426,499 |
| Gold | $701,593,905 |
| Australian Equities – Short | $453,223,865 |
| International Equities – Sector | $443,449,483 |
Top sub-category outflows (by $) – YTD
| Sub-Category | Outflow Value |
| International Equities – Europe | -$22,399,165 |
| International Equities – Asia | -$14,696,401 |
| Australian Equities – Sector | -$2,808,876 |
Comments: Outflows were generally very low, with no broad category seeing net selling. The selling we did see this year so far has been in European equities, which remains an exposure which appears to be shunned by Australian investors.
Hi given your full time exposure to markets. Which ETF’s would you suggest for a guesstimate on highest growth over next 12 – 24 months also thinking about AUD / US dollar rates please ? Tks Lex
Hi Lex,
We publish a number of our ideas under the insights section of our website, including market updates from our Chief Economist, David Bassanese. You can find these insights here: https://www.betashares.com.au/insights/.
Feel free to give us a call on 1300 487 577 if you have any questions on our ETFs.
Sincerely,
BetaShares Client Services