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Exchange traded fund market tipped for new record in 2019

Australian dollars

The strong growth in Australia’s exchange traded fund (ETF) industry is predicted to continue into next year, with one fund manager expecting it to finish 2019 valued at $55-$60 billion.

In its 2018 annual predictions, Betashares has forecasted the ETF industry will maintain its trajectory of rapid growth in 2019, spurred by strong demand from investors, product innovation and improved advice models.

Over the year to November 2018, the Australian ETF industry grew by $5.6 billion to finish at $41.1 billion.

BetaShares CEO, Alex Vynokur, said such expansion highlighted the increasing interest of investors in ETFs.

“It’s been a year of exciting new milestones for the industry, the growth and adoption of ETFs by investors and advisers being just one of these.

“More investors are recognising the benefits of ETFs, including the ability to diversify portfolios, lower costs and access opportunities in international sectors which have historically been hard for Australians to access.”

Heading into 2019, BetaShares predicts three major trends will shape the growth of the ETF industry.

  • An increase in the adoption of ETF model portfolios

The fund management company says it expects there will be an uptake of ETF model portfolios, as investors are enticed by advisers providing more efficient service and lower costs.

It predicts the increase in ETF strategists, investment consultants and portfolio construction specialists, along with the advent of robo-advisers will also contribute to the adoption of ETF model portfolios.

“We’re seeing an increase in demand for model portfolios and asset allocation services, particularly from advisers and dealer groups who can use such services to offer efficient and cost-effective access to diversified investment portfolios, at much lower costs for clients than had been previously available”, Mr. Vynokur said.

  • Fixed-income ETFs will be a popular portfolio addition

BetaShares predicts there will be a significant increase in investors adopting ASX-traded fixed income funds next year.

According to Mr Vynokur, the fixed-income asset class will likely be popular amongst investors due to current market volatility and the growing number of aging Australians seeking portfolio stability in retirement.

“Fixed income has long been an overlooked allocation, primarily due to access issues. ETFs are reducing barriers to adoption across a variety of different asset classes, including fixed income,” said Mr Vynokur.

  • Thematic investing still a trend

The strong growth in thematic ETFs is predicted to continue into 2019, particularly in the areas of global cybersecurity, health care, and robotics and artificial intelligence.

“More recently, valuations in the Asian technology sector have become more attractive, which has underpinned a strong period of growth in the adoption of the Asian Technology Tigers ETF (ASX: ASIA),” Mr Vynokur remarked.

Overall, BetaShares said it anticipated the ETF industry will experience another year of strong growth and finish up close to $14 billion above this year.

“The growth of the ETF industry in Australia has been impressive in recent years, and we predict it will continue on this trajectory in 2019. We expect the ETF industry to end 2019 at $55-60 billion”, Mr Vynokur said.

Exchange traded fund market tipped for new record in 2019
Australian dollars
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