Despite the challenging investment environment, the size of the average transaction and total funds under management of Australian-listed Exchange Traded Funds (ETFs) have risen sharply.
This would largely reflect the increasing recognition of ETFs as an effective, straightforward and low-cost means to appropriately diversify portfolios.
Recent ASX research shows that the 12-month average transaction of exchange traded products – ETFs and Exchange Traded Commodities – rose from $32,289 two years ago to $63,006 by April this year. This is a rise of 95 per cent. And the market capitalisation of Australian-listed exchange traded products – the vast majority being index-tracking ETFs – grew by 96 per cent to a record high of $21.8 billion over the two years to April.
Much of this rapid growth in the market capitalisation of locally-listed ETFs is attributable to new investments, not market returns.
London-based specialist ETF researcher ETFGI reports that the market capitalisation of the 6297 exchange traded products/ETFs listed on 65 global exchanges reached a record US$3.137 trillion by the end of April. This is the 27th consecutive month of positive net investment inflows.
It should be emphasised that there are significant differences between some types of ETFs available overseas and in Australia.
More Australian advisers and their clients are using ETFs as the core of investment portfolio that can be readily rebalanced to remain in line with their strategic or target asset allocations.
Periodical rebalancing is critical for keeping investors on track to achieve their long-term goals.
As Smart Investing regularly discusses, research repeatedly shows that a diversified portfolio’s strategic asset allocation is the primary determinant of its return variability and performance over the long term.
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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. |
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