The trading volumes and value of exchange-traded funds (ETF) grew exponentially in March despite funds under management (FUM) declining over the month due to increased market volatility, a review of the Australian ETF market has revealed.
According to the “BetaShares Australian ETF Review” for March, the trading value of Australian Securities Exchange (ASX)-listed ETFs reached an all-time high of about $18 billion compared to $7.2 billion recorded in February. By contrast, total ETF FUM fell by $6.8 billion to $57.2 billion by the end of March, corresponding with falling equity markets.
Despite the increased market volatility, the report also revealed the ETF industry had recorded net positive inflows of $522 million by the end of March.
“Investors looking to buy the dip in the share market rotated heavily into broad Australian equities products (which received approximately $1.1 billion of net inflows), while fixed income and cash exposures were sold down,” BetaShares noted.
“Interestingly, March saw robust inflows into hedged international products, coinciding with further Australian dollar weakness.”
BetaShares chief executive Alex Vynokur said: “During this challenging period, the extraordinary rise in ETF trading volumes indicates that Australian investors are increasingly turning to ETFs to express their investment views, suggesting that the liquidity of ETFs is proving attractive amidst some of the most intense volatility in recent history.”
In February, an ETF Securities report found the number of ETFs in the Australian market had increased to more than 200, with the value of the market totalling $60 billion.
In March, a panel of industry stakeholders at the S&P Dow Jones Indices Annual Indexing and ETF Masterclass said advisers could minimise their compliance risk through the use of ETFs instead of picking individual stocks for clients wanting to invest directly on the ASX.
