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SMSFs no longer main ETF growth driver

The latest industry research has revealed that while SMSFs’ use of exchange-traded funds (ETF) continues to increase, they are no longer the main growth driver for these types of investment vehicles.

The “BetaShares/Investment Trends 2017 Exchange Traded Funds Summary Report” showed the number of SMSFs holding ETFs in their portfolios jumped from 100,000 to 105,000 between October 2016 and September 2017.

From an overall ETF investment perspective, however, the study indicated SMSF members only represented 33 per cent of ETF users, with the total number of investors holding an ETF being 314,000 as at September 2017.

The data showed in July 2008, SMSFs represented 51 per cent of investors with an ETF in their portfolio.

“What’s really been driving the growth of the market, or contributing to the growth of the market, over the past few years has been the more mass-market appeal of ETFs,” Investment Trends research director Recep Peker said.

“Investors coming in who don’t have an SMSF are far greater than those who are SMSF investors.”

BetaShares chief executive Alex Vynokur confirmed SMSFs were now playing a different role in the market than what had historically been the case.

“SMSFs were definitely the key driving force behind ETF adoption in the early days, but what we’re observing now is there are actually several engines [in the use of ETFs],” Vynokur said.

“We’ve got the self-directed investors, we’ve got millennials who are younger who are not investing through an SMSF, we’ve seen a pickup in the number of financial advisers who are starting to use ETFs, and we’re also starting to see quite a meaningful pickup in the number of institutional investors who are using ETFs, but they’re not part of this survey.”

The research also showed SMSF members only represented 9 per cent of people who first invested in an ETF less than a year ago compared to 33 per cent of individuals who made an initial ETF investment over five years ago.

This coincided with the figures that revealed the average age of a first-time ETF investor over five years ago was 56, whereas the average age of those people who invested in an ETF for the first time less than 12 months ago was 42.

The “BetaShares/Investment Trends 2017 Exchange Traded Funds Summary Report” is the ninth time such a study has been undertaken. It was conducted in 2017 between August and September and analysed 6000 valid responses, including 1093 from those who currently use an ETF and 291 individuals who were considering using one but had not yet done so.

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