New ETF players expected to enter market

Australia will see new exchange-traded fund (ETF) issuers come to market to fill product gaps, creating opportunities for the bulk of SMSF investors still considered to be in the early-adoption phase, according to one provider.

“New issuers will be the holy grail,” ETF Securities Australia head Kris Walesby told selfmanagedsuper.

“Over the next two to three years, we will see several new issuers entering the market.

“There aren’t enough and it’s too attractive a market – a lot of people have been waiting on the sidelines because [the market] was just too small, but now they’re seeing this really big growth and it looks like it’s going to accelerate fast in the next 10 to 15 years.

“I think maybe in three years we’ll see a doubling of the amount of ETF issuers – not exchange-quoted managed fund issuers – and they will probably be big names as well because there are many outside of Australia, so many of these guys can and probably will enter the market.”

Walesby revealed from his experiences attending SMSF events, the increase in ETF use by SMSFs was palpable.

“You can see it from just the show of hands that their use of ETFs has increased quite dramatically – looking around the audience it’s probably about 50 per cent to 60 per cent who know about ETFs now and half of them use them,” he said.

“Two years ago, there was probably 15 per cent of people who used ETFs.

“But I’d still say it’s early-stage adoption of ETFs by SMSFs. And I’m seeing a lot of SMSFs taking up ETFs who are partially advised, so it’s not really ‘self-managed’.”

He added while there were good sector plays in Australia, full coverage has not yet been reached, and thematic investing, such as robotics and artificial intelligence, was only beginning to emerge.

“There are a lot of products in Australia and many people are saying there’s not much room for anything else, but that’s simply not the case,” he said.

“There is space for more and we’ve only scratched the surface really.”

Last week, the Australian ETF market recorded inflows of $95 million and outflows of $27 million from domestically domiciled ETFs.

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