The latest research into the exchange-traded funds (ETF) shows index offerings covering Australian equities outperformed those that were actively managed with the same underlying assets over the past 12 months.
This was one of the key findings from the annual Stockspot “Australian ETF Research” report, which indicated index Australian share ETFs generated an average one-year return of 13.1 per cent compared to their actively managed counterparts, which produced an average return of 5.9 per cent.
“Whether you’re investing in Australian shares, global shares or bonds, more than 80 per cent of active fund managers have consistently failed to beat the index. It’s no wonder investors are abandoning risky stock picking for the safer option of tracking the market index,” Stockspot chief executive Chris Brycki said.
The study also identified fixed income as the fastest-growing ETF offerings, having attracted one-third of all new inflows over the past year. The result means the funds under management (FUM) for bond ETFs almost doubled during that period.
Another key finding was the cost savings provided for investors over 2018/19 were estimated to be $300 million had they used an ETF instead of an actively managed unitised fund.
“Considering ETFs still only make up 2 per cent of the share market in Australia, a $300 million saving is huge. This figure will increase exponentially as more Australian investors gravitate towards these wonderful low-cost wealth-building products,” Brycki said.
Further, the study predicted FUM in ETFs would double over the coming three years to reach $100 billion by 2022. This forecast is based on the theory that the move away from direct shares and managed funds into ETFs that was experienced in the United States and Europe would be replicated in Australia.
To that end, the report highlighted ETFs had grown from $17.8 billion to $45.8 million in FUM over the past five years or the duration of the paper.
These figures show ETFs are still the fastest-growing area in the Australian asset management market.
The research analysed statistics pertaining to 190 ETF products.