ETFs: Look Behind The Statistics
A look behind the recent statistics for Exchange Traded Funds (ETFs) underlines their multi-faceted growth, globally and in Australia.
This growth is in terms of assets under management, number of average monthly transactions, the average value of monthly transactions and new products.
For instance, the latest ASX statistics for exchanged traded products – the vast majority being index-tracking ETFs – show:
- The market capitalisation of Australian-listed exchange traded products – the vast majority being index-tracking ETFs – grew by 86 per cent over the two years to September to reach a new high of $24 billion.
- The 12-month average number of monthly transactions reached 63,843 in September – up by 90 per cent over the past two years.
- The average value of monthly transactions for the 12 months to September reached $1.89 billion – up by 95 per cent over the past two years.
- The number of Australian-listed products rose to 146 by September – up by 51 per cent over two years.
Not surprising, the growth of the global ETP market is continuing its long-time pattern of reaching new monthly records.
London-based specialist ETF researcher ETFGI reports that the market capitalisation of the 6526 exchange traded products/ETFs listed on 65 global exchanges reached a record US$3.408 trillion by the end of September. This is the 32nd consecutive month of positive net investment inflows.
There are significant differences between some types of ETFs available overseas and in Australia.
Much of this rapid growth in the market capitalisation of locally-listed ETFs is attributable to new investments, not market returns.
What are some of the things that these growth statistics suggest?
The growth in popularity of ETFs among Australian investors would reflect, in part, the increasing investor recognition of the benefits of low-cost investing through index-tracking ETFs and traditional index funds. This is in addition, of course, to the use of ETFs as a means to easily rebalance portfolios back to their strategic or target asset allocations to readily create or adjust broadly-diversified portfolios. (See Your ETF toolbox, Smart Investing October 16.)
Robin Bowerman is Head of Market Strategy and Communication, Vanguard Australia.
As a renowned market commentator and editor Robin has spent more than two decades writing about all things investment.