Australian ETF market is maturing despite ‘gimmicks’, study says

Australia’s alternate traded fund market “is changing into extra entrenched and diversified”, although the massive variety of ETFs obtainable could imply the precedence “will now be consolidation of belongings in present merchandise”, in response to a brand new report from Cerulli Associates.

The worldwide analysis group says in its newest Cerulli Edge: Asian Month-to-month Product Developments report that there have been 304 ETFs listed in Australia as of the top of September and that new merchandise are being launched “even in tough market circumstances”.

Based on Cerulli, “the variety of the market has confirmed helpful in tough markets as a result of it’s now sufficiently subtle to supply far more than purely long-only choices”.

The analysis group cited the instance of leveraged quick funds, “which might not have existed within the sector’s early days” and that had been the best-performing merchandise in September.

This text was beforehand revealed by Ignites Asia, a title owned by the FT Group.

In different months, sure specialist commodity ETFs confirmed sturdy efficiency, similar to a world uranium ETF in August.

Cerulli says the momentum in Australia’s ETF trade is “extraordinarily promising, even when there’s a sense that new product launches have gotten so area of interest as to be gimmicky”.

The report notes that ETF suppliers have been launching area of interest merchandise, although some merchandise have been dropping cash and others have even delisted.

It refers back to the cryptocurrency ETFs that launched to nice fanfare in Could however have been delisted on account of low investor demand.

Native digital asset supervisor Cosmos Asset Administration delisted its three crypto ETFs in early November, and two ETFs that invested in items of the Toronto-listed 3iQ CoinShares Bitcoin and 3iQ CoinShares Ether ETFs additionally stopped trading final month.

The report additionally warns that “with so many merchandise now obtainable, maybe the precedence will now be consolidation of belongings in present merchandise slightly than to all the time launch one thing new”.

Cerulli notes the Australian ETF market was nonetheless closely dominated by fairness methods.

The analysis group cites information from Morningstar displaying that whereas fairness ETF belongings dropped “dramatically” from $67.2bn on the finish of final yr to $58.5bn as of the top of September, these autos nonetheless managed more cash than all different asset lessons put collectively.

Total Aussie ETF belongings fell from practically $87bn on the finish of 2021 to $74.5bn on the finish of September.

Fairness ETFs accounted for $9.7bn of the $11.6bn of web inflows posted by Australian ETFs within the first three quarters of 2022.

Cerulli notes that it was “placing that various inflows have dropped away very sharply, whereas cash market merchandise have turned sharply destructive — an fascinating scenario on condition that rising charges are offering greater returns on money than has been the case for a few years.

“As a substitute, it seems traders are lastly returning to fastened revenue as yields rise considerably for the primary time in a decade.”

Internet flows into fixed-income ETFs within the first 9 months of this yr reached practically $1.6 billion, near 2021’s full-year whole of $1.7bn.

*Ignites Asia is a information service revealed by FT Specialist for professionals working within the asset administration trade. It covers every part from new product launches to rules and trade developments. Trials and subscriptions can be found at ignitesasia.com.

Click here to go to the ETF Hub