The ETF juggernaut shows no signs of slowing: BetaShares Investment Trends ETF Report 2021 | BetaShares

The ETF juggernaut shows no signs of slowing: BetaShares Investment Trends ETF Report 2021

BY BetaShares ETFs | 8 February 2022
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The ETF juggernaut shows no signs of slowing: BetaShares Investment Trends ETF Report 2021

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A recent survey shows that the number of Australians investing in ETFs grew strongly in 2021, and judging by investor intentions, that growth shows no sign of slowing.

The BetaShares/Investment Trends ETF Report 2021 is the 13th annual survey commissioned by BetaShares, and surveyed more than 500 financial advisers and 3,800 current ETF investors between August and October 2021.

Australian ETF investors set to exceed 2 million in 2022

The 2021 Report found that more than 1.73 million Australians hold ETFs in their investment portfolio, a 33% increase on 2020. The data also shows that another 275,000 Australians intend to start investing in ETFs for the first time in the next 12 months, which would see the number of individual Australian ETF investors break through two million for the first time in 2022.

Not only is the number of ETF investors set to rise, but those who already invest in ETFs plan to increase the dollars they allocate to ETFs.

According to the report, 1.46 million existing ETF investors – or 84% of the existing ETF investor base – intend to increase their allocation to ETFs in the next 12 months, which represents the highest rate since 2013.

Number of ETF investors and re-investors

Investment Trends 2021 - number of ETF investors

Source: BetaShares/Investment Trends ETF Report 2021.

ETFs have expanded their appeal across age and gender over time.

The survey found that recent entrants to the ETF market are on average younger and more likely to be female – 21% of new ETF investors are females aged 18-34.

Compared to five or more years ago, the first-time ETF investor in 2021 was on average more than 8 years younger and twice as likely to be female.

The younger cohort remains a strong driving force behind continued growth, with investors under the age of 35 making up 41% of those ETF investors intending to commit further funds.

How are investors using ETFs in their portfolios?

The report found that Australian investors see ETFs as an increasingly important component of their investment strategy, with more than a quarter (27%) of ETF investors now using ETFs as the core of their portfolio, compared with 4% in 2019.

The typical ETF investor allocates 10% of their entire investable assets to ETFs, up from 8% in 2020 and double the 5% that was typically allocated back in 2012.

The survey indicates that ETFs are generally seen as a long-term vehicle to provide growth for a portfolio, with 77% of current ETF investors nominating capital growth as a primary investment objective for investing in ETFs. 50% of ETF investors said they intended to hold their investment for at least 10 years, and a further 23% for 5-10 years.

Why are investors choosing ETFs?

Portfolio diversification remains the single biggest reason investors choose ETFs. Avoiding individual stock exposure risk and saving time also rank highly among reasons for using ETFs.

More experienced ETF investors (five or more years invested) also nominate convenient access to overseas markets, access to specific types of investments and liquidity benefits as reasons for allocating funds to ETFs.

In 2021, ETF investors overwhelmingly looked overseas for growth, with more than half of net inflows into exchange traded products going to global equity products. Australian equity products accounted for 22% of net inflows. The >$12 billion that flowed into global equity ETFs was more than double the inflows received in the previous 12 months.

38% of ETF investors said their largest ETF investment was an international equities fund, while a similar number (36%) said they had committed the most to an Australian equities ETF.

The release of the survey comes as the Australian ETF industry caps off a remarkable year of growth, with ETF market cap at the end of 2021 standing at $136.9 billion, up $41.8 billion (44%) from the end of 2020. More than $23 billion of new money flowed into the industry in 2021, with the remainder of industry growth due to rising asset values around the world.

While we are not expecting the markets to offer as much assistance in 2022 as they did last year, by year end we forecast that total industry FUM will be in the range of $180-$190 billion.

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