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MAY 2021: ETF INDUSTRY GROWS EXPONENTIALLY WHILE LICs STAGNATE
The Australian ETF industry continued its strong growth in May, once again aided by sharemarket appreciation and robust net inflows. In this edition of the ETF Review, we also check in on the relative growth of the Australian ETF v. Listed Investment Company (LIC) industries – it’s certainly a tale of two cities! Read on for more details, including best performers, asset flow categories and more.
Australian ETP Market Cap: August 2001 – May 2021
Source: ASX, Chi-X, BetaShares.
- ASX Exchange Traded Product market cap: $111.7B1 – all time end-of-month high
- Market cap change for month: 2.7%, $2.9B
- Market cap growth for the last 12 months: 75%, + $47.7B – fastest yearly growth ($ terms) on record
Comment: The industry ended May 2021 at a fresh all-time high of $111.7B total market cap, growing by ~3% month on month (+$2.9B). Industry growth over the last 12 months has been 75%, representing absolute growth of $47.7B over this period – representing the highest $ value increase over 12 months in the industry’s history.
1. Includes total FuM for ETFs trading on both ASX and Chi-X
- Net new money for month (units outstanding by $ value): +$1.5B
Comment: In what has been approximately the industry average in 2021, total industry net inflows were ~$1.5B. This month’s growth was split evenly between net new money into the industry (52% of monthly growth) and asset value appreciation (48% of monthly growth).
- 264 Exchange Traded Products trading on the ASX and Chi-X.
Comment: No new funds launched this month, with 3 single bond products maturing.
- ASX ETF trading value increased ~5% vs. the previous month.
Comment: Monthly trading value remained high, increasing 5% month of month, but remaining at approximately the $7B mark, which has been the average for 2021 to date..
- Best performance this month was in gold miners and gold bullion products, including our MNRS ETF (10.7%) and our hedged gold bullion ETF (ASX: QAU, 7.6%) as inflation fears caused precious metals to rally.
Top 5 category inflows (by $) – May 2021
Comment: While flows into international equities exposures have been strong throughout the year, this month saw a particularly large spike in international equities products. In all, over $1B of the industry’s net flows (~70%) came from this category v. ~$270m into fixed income products, the second most popular category this month.
Top 5 category outflows (by $) – May 2021
Source: Bloomberg, BetaShares.
Source: Bloomberg, BetaShares.
Top sub-category inflows (by $) – May 2021
|International Equities – Developed World||$352,325,408|
|International Equities – US||$243,754,369|
|International Equities – Sector||$188,717,793|
Top sub-category outflows (by $) – May 2021
|Australian Equities – Broad||($136,178,269)|
|Australian Equities – Geared||($2,138,254)|
Comment: Outflows were limited this month, with the most notable outflow movement being a large institutional redemption out of a broad Australian equities product.
ETFs v LICs
Comment: As we near the close of the first half of 2021, we thought it would be interesting to check on the relative growth of the Australian ETF v Listed Investment Company (LIC) industries. As the chart above illustrates – it’s a tale of two cities! Since the launch of the first Australian ETF in 2001, the Australian ETF industry has grown at ~4x the rate of the LIC industry. Perhaps even more markedly, since the abolition of commissions paid to brokers by LIC sponsors in May 2020, we’ve seen net growth of Australian ETF products of 21 vs. net reduction in Australian LICs of 10 products. The Australian investment public are clearly ‘voting with their feet’ in terms of choice of investment structure, and in our view, the lethargic growth of the LIC industry appears very much tied to the change in broker remuneration.