ETF rush predicted to intensify

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September 10 2021
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The Australian ETF sector advanced AU$6.3 billion in August to hit a new milestone, as its popularity among financial advisers soared.

ETFs are set to get more popular, as registered financial professionals continue to recognise their value, according to an industry leader.

Speaking to ifa, Kanish Chugh, head of distribution at ETF Securities, explained that their growth in popularity can be attributed to several trends including a “changing of the guard”, as a younger generation of financial advisers and other investment professionals enter the industry.

Noting a “steady adoption of ETFs from investment professionals over the past five or six years”, Mr Chugh said increased knowledge of ETF products has also boosted their popularity, catapulting the industry forward in the last two years.

“Fifteen years ago, 10 years ago even, ETFs were a relatively unused investment vehicle,” Mr Chugh said.

“The adoption of ETFs has had a rapid growth in the past two to three years.”

What has helped drive this change is the acknowledgment of the demand for more flexible and cost-effective products by younger investment professionals.

“The pressure on outperforming their benchmarks and the fees that they are charging, I think that has been what has helped investors make the decision to look at ETFs,” Mr Chugh stated.

ETFs sit within the space of exchange traded products (ETPs), and according to Mr Chugh, the boom in ETFs sits within a wider success story that is only picking up in momentum.

There is “AU$128.2 billion in ETPs (currently) listed on the ASX”, he said.

“In August 2020, it was AU$70.5 billion.”

The latest BetaShares Australian ETF review revealed that the ETF sector has broken another significant milestone with a record-high market cap of AU$125.1 billion recorded in August.

Australia’s ETF and ETP growth is hardly an isolated occurrence, with the patterns seen mimicking global trends in the space.

ETFGI, an independent research and consultancy firm, confirmed that record assets and net inflows of US$9.73 trillion and US$834 billion in ETFs and ETPs, listed globally, were recorded at the end of August, following 27 months of consecutive net inflows.

Much like what has been seen in Australia, the global narrative is one in which interest for ETPs has gathered in the last few years, with 2021 proving to be a vital flashpoint.

The report found that global net inflows of the YTD for ETPs jumped to US$834.21 billion. The same figure for the whole of 2020 was recorded at US$762.77 billion.

In the past 12 months, the global ETP industry has seen US$1.78 trillion in net inflows.

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