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AUSTRALIAN ETF INDUSTRY STAGES A ‘V’ SHAPED RECOVERY
The shape of the economic recovery from the COVID-19 pandemic might remain uncertain – but the Australian ETF industry has staged a V-shaped recovery over the last two months, with funds under management (FuM) increasing by more than 4% in May to finish the month only 3% off its highest end-of-month peak. The industry grew by $2.7B, to end the month at $64B, just below the January end-of-month FuM of $66B. Read on for more details.
Australian ETP Market Cap: July 2001 – May 2020
Source: ASX, Chi-X, BetaShares
Market cap
- ASX Exchange Traded Product Market Cap: $64.0B1 – only 3% off its highest end-of-month peak of $66B
- Market cap change for month: 4.4%, +$2.7B
- Market cap growth for the last 12 months: 31%, +$15.3B
Comment: Industry FuM grew by $2.7B (4.4% MoM increase) to end May at $64.0B. Industry growth over the last 12 months has been 31%, with absolute growth of $15.3B over this period.
1. Includes total FuM for ETFs trading on both ASX & Chi-X
New money
- Net new money for month (units outstanding by % value): +$1.6B
Comment: Importantly for the industry, more than half of this month’s growth (60%) came from net inflows ($1.6B), with the remainder of the growth the result of increased asset values as markets continued to rally.
Products
- 249 Exchange Traded Products trading on the ASX and Chi-X – 3 new products launched including BetaShares Global Government Bond 20+ Year ETF – Currency Hedged, and two new fixed income products from iShares. Three single exposure bond products matured.
Trading value
- The high trading values that have been a feature of the year so far continued, with $8.2B of exchange traded products traded in the month.
Comment: At $8.2B value traded for the month, it was the 3rd-highest trading value on record. The continued strength in trading volumes is a big positive for the industry – the last four months have been the four highest trading months on record, indicating that in turbulent times Australian investors are finding the liquidity of ETFs attractive, regardless of whether markets are rising or falling.
Performance
- After several months of large falls, we saw Crude Oil exposures perform strongly over May, with BetaShares OOO ETF rising ~33% following a period of turmoil in oil markets, while the Australian Technology sector (via ATEC) rose ~15% in the month.
Top 5 category inflows (by $) – May 2020
| Category | Inflow Value | |
| Australian Equities | $665,646,911 | |
| International Equities | $493,338,587 | |
| Fixed Income | $166,011,513 | |
| Commodities | $142,437,503 | |
| Short | $129,657,253 | |
Comment: In May, investors were clearly displaying a ‘risk-on’ attitude, with more than $1B flowing into equities. Australian equities led the way with $666M, followed by international equities with $493M. In addition, in a reversal of trajectory, fixed income exposures attracted $166M of new money, entirely due to funds flowing into Australian bonds, which totalled $190M, while global bonds saw an outflow of $24M. The previous two months saw outflows from Australian bond exposures.
Top category outflows (by $) – May 2020
| Category | Outflow Value | |
| Cash | ($72,595,693) | |
| Currency | ($385,026) |
Top sub-category inflows (by $) – May 2020
| Sub-Category | Inflow Value | |
| Australian Equities – Broad | $541,003,012 | |
| International Equities – Developed World | $300,499,656 | |
| Australian Bonds | $190,597,079 | |
| Gold | $111,321,559 | |
| International Equities – Sector | $86,496,956 | |
Top sub-category outflows (by $) – May 2020
| Category | Outflow Value | |
| Cash | ($72,595,693) | |
| Global Bonds | ($24,585,566) | |
| Australian Equities – Sector | ($10,642,310) | |
| Currency | ($385,026) | |
Comment: Outflows were limited this month, and were primarily in Cash and Global Bond exposures as investors continued to favour ‘risk on’ exposures.