SMSFs key to ETP 3.0 evolution

The Australian exchange-traded product (ETP) sector has entered its third stage of progress as actively managed investment strategies start to come to the fore, with SMSF investors and advisers playing a crucial role in their popularity.

The finding was revealed in a new white paper by BetaShares, “Getting Active: The Next Evolution in Exchange Traded Funds (ETF)”, released today.

The paper tracks the journey of ETPs from stage one as simple, vanilla index-tracking vehicles, stage two as rules-based products and the current third stage as active investment strategies, which are driving further investment in the sector.

Growth in active ETFs had, in part, been driven by changes to regulation, which exempted active managers from having to disclose the underlying securities in their funds on a daily basis, which was the case for traditional passive ETFs, the paper said.

“Like passive ETFs, SMSF investors have been and will continue to be strong adopters of active ETF products,” BetaShares head of marketing and strategy Ilan Israelstam told selfmanagedsuper.

“SMSF investors make up approximately 40 per cent of the investors in ETFs and we would expect similar adoption in active ETFs.

“Our experience to date at BetaShares has been that SMSF investors have been attracted to the core benefits of ETFs, and in particular the ease of access of being able to buy and sell the products as easily as buying any share on the Australian Securities Exchange.

“Being able to access high-quality active strategies in this same way is just another way in which ETFs are helping SMSFs expand their investment horizons.”

Research by Investment Trends revealed active ETFs had the potential to match the growth of their passive counterparts, with widespread adviser interest in the sector.

Currently, 100,000 SMSFs invest in passive ETFs and 44 per cent of financial planners are using passively managed ETFs as part of their clients’ investments.

Yet active ETFs had the possibility of attracting adviser interest beyond those currently using ETFs, with half of advisers who were not yet using passive ETFs indicating an interest in using active ETFs in their practices, according to Investment Trends.

Commenting on this, BetaShares managing director Alex Vynokur said: “While passively managed funds currently make up the lion’s share of the adviser interest in the ETF market, the evidence suggests advisers are open to accessing a broader range of investment strategies.

“There are now tremendous opportunities for active managers to directly offer their strategies to investors in exchange-traded form and we believe the sector has a rosy future.”

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