ETF industry now larger than 80+ year old LIC market

The Australian ETF industry passed another milestone in September, becoming the most popular structure for ASX-traded managed investments with total funds under management in ASX-traded ETFs exceeding the significantly more established Listed Investment Company (LIC) market.  Read on for details of the month in ETFs.

As of September 2018, the ETF industry is ~$60m larger than the LIC industry ($42.29B v $42.23B). This feat is particularly striking given that the first LIC was incorporated in Australia some 65 years before the launch of the first ASX-traded ETF, with the LIC industry now being an 82 year old industry compared to the 17 year old “spring chicken” Australian ETF market. At a product supply level, the exchange traded fund industry has exhibited strong product growth in its relatively short history with total ETPs on the ASX now double the number of LICs (240 ETPs vs. 110 LICs).

A critical part of the relative appeal of the ETP industry is its cost-effectiveness, with our analysis showing that the average asset-weighted fees in the ETP industry are 0.22% p.a., vs. an average level of 0.66% p.a. for the LIC industry (excluding any performance fees levied), and simple average fees of 0.50% p.a. for ETPs vs. 1.04% p.a. for LICs.

Our belief is that given their structural benefits, and wider product array, the ETP industry will grow substantially more quickly than the LIC industry. As such we expect the Australian ETP industry to be double the size of the Australian LIC industry within 4-5 years.

Market cap

Comment: Net inflows remained strong notwithstanding falling markets in Australia and flat global markets with~$839m of net new money flowing into the industry