The Australian exchange-traded fund (ETF) market has reached about $39 billion, with funds under management growing by $2.5 billion in the June quarter, according to investment manager Vanguard.
Vanguard’s “June Quarter 2018 ETF Report” revealed $1.1 billion of the quarter’s growth was new cash flow.
The report also found the quarter was a positive one for investors with most of the major asset classes delivering healthy returns.
It showed across the industry, investors continued to diversify into global equity ETFs, with the asset class attracting more than half of all ETF cash flows for the quarter.
Fixed income products collected around 25 per cent of total cash flows over the three months.
Furthermore, the report said increasingly investors are choosing to diversify their portfolios through a single transaction via diversified ETFs.
The multi-asset class sector received just under 5 per cent of flows for the quarter, with Vanguard’s diversified ETFs now holding over $130 million in assets under management.
For the year to 30 June, Australian Securities Exchange-listed ETFs recorded a $10 billion increase in assets under management as investors continued to embrace their lower relative cost and flexible attributes.
As the industry matures, this growth is driving greater trade efficiency, with higher volumes of trade tightening the spread costs of ETFs, Vanguard head of ETF capital markets Damien Sherman said.
“The speed and extent of the growth of ETFs has led some commentators to suggest that ETFs are having a negative impact on investment markets, however, we have seen no evidence of them causing disruptions to the underlying securities markets nor having an impact on price discovery,” Sherman said.
“What we have seen is ETFs serving to democratise investing, allowing investors access to markets and sectors previously out of reach, and, as the market has grown, competition amongst issuers and increasing trading volumes has driven down the cost to invest, allowing investors to keep more of the returns they earn.”
He added increases in trading volumes encourage market makers to provide more liquidity for ETFs.
“Greater volumes also increase the chances that individual buyers and sellers will transact with each other, which increases competition for ETFs and leads to a reduction in trading spreads,” he said.
“Ultimately what this means for investors is further savings when it comes to transaction and trade execution costs.”
Vanguard’s Australian ETFs have surpassed $11 billion in assets under management, increasing by nearly $1 billion over the quarter.
