ETFs thrive despite COVID-19


The performance of ETFs continues to reflect a high level of investor confidence in the sector despite COVID-19 related market volatility.

Exchange-traded funds (ETF) are performing at “all-time highs” despite the market turmoil caused by the COVID-19 pandemic, a recent report on the sector has revealed.

According to the “Q2 ETF Landscape Report” from ETF Securities, a total of 207 ETFs are currently available on the Australian Securities Exchange (ASX), with the number of ETF transactions continuing to reflect a high level of investor confidence in the sector.

ETF Securities chief executive Kris Walesby said: “According to recent data from the ASX, pre-COVID-19 crisis ETF trades accounted for approximately 4 per cent of total trades on the ASX, but during the COVID-19 pandemic, this ballooned to about 10 per cent of total trades.

“This may be a reflection of the appeal of diversification and versatility that ETFs can offer to investors. They realise that they can access a variety of asset classes at a relatively low cost and can be used as the building blocks of multi-asset portfolios.”

The initial volatility caused by the COVID-19 pandemic had resulted in investors seeking stability in ETFs, with a focus on precious metals or broad-based market ETFs in particular, Walesby noted. He added investors now appeared to have shifted their focus to recovery and were showing more interest in Australian equity and property ETFs.

“We also note an increase in shorter-term trading activity, such as cash, commodities and geared funds,” he said.

In addition, he highlighted the success of the three most recent additions to the ETF market: the ETF Securities FANG+ ETF, the BetaShares S&P/ASX Australian Technology ETF and the VanEck Emerging Income Opportunities Active ETF, all launched in the early stages of the pandemic.

“These new funds have seen capital inflows of over $60 million to date. This trend gives us confidence that Australian investors will continue to seek new opportunities in the ETF market to capture attractive buying opportunities,” he said.

“We believe the ETF sector will continue to perform strongly despite pressure from extreme market circumstances.”

In April, ETF Securities co-head of sales Kanish Chugh said ETFs had strengthened their standing among investors, despite experiencing significant scrutiny in line with the COVID-19-led volatility in equity markets around the world in February and March.

Earlier this year, a panel of industry stakeholders 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.

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