Australian ETF assets fall by $2bn

By Jon Bragg

April 14 2022
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Assets under management in the Australian ETF market fell by $2 billion during the first quarter of the year.

Australian ETFs recorded $132 billion in assets under management (AUM) in Q1 2022, down from $134 billion in Q4 2021, according to new data from the ASX and Vanguard.

Since the war in Ukraine, changing US monetary policy and other significant developments weighed on investor confidence during the quarter; Vanguard noted that assets continued to grow year-on-year but at a slower pace.

The AUM of Australian ETFs was $102 billion in Q1 2021 and $57 billion in Q1 2020.

“Market conditions are challenging right now, but we’re pleased to see investors are still choosing to invest with Vanguard and using ETFs to build or complement their portfolios,” said Vanguard head of ETF capital markets Asia-Pacific and investment strategy group Ming Tieu.

Global equity ETFs remained favoured by Aussie investors with flows of $1.6 billion, however this represented a fall of 48 per cent on the previous quarter.

Meanwhile, domestic equity ETFs saw $1.1 billion in inflows, down 50 per cent quarter-on-quarter.

Flows into fixed income ETFs were also down, including a $555 million outflow for cash ETFs, driven by rising inflation and looming interest rate rises.

$325 million of flows were recorded for Australian fixed income ETFs, 44 per cent lower than Q4 2021, and $195 million flowed into global fixed income ETFs for a fall of almost 30 per cent.

“Although tightening monetary policy and rising rates will generally mean a fall in bond prices, there is a silver lining for investors whose investment horizon is longer than the duration of their bonds. These investors may actually benefit from rising rates in the form of higher total returns,” Mr Tieu noted.

“However, bonds should not be assessed solely for their return potential, but rather for the role they play in insulating a portfolio against market downturns and how they can help increase portfolio diversification.”

Vanguard reported $2.2 billion in inflows in Q1 2022, the third best quarter for the firm on record, accounting for 46.4 per cent of the total market.

The firm’s Australian Shares Index ETF (VAS) was the most popular product during the quarter with $731 million in inflows.

“Vanguard has long advocated that in times of heightened volatility, the best thing investors can do is to simply stay the course,” said Mr Tieu.

“As history has proven, significantly altering asset allocations or cashing out in response to short-term events will exclude investors from fully participating in the inevitable market recovery.”

Vanguard recently reported that investors were undeterred by recent market volatility and had continued to maintain investment discipline.

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