The Australian exchange-traded fund (ETF) sector has grown by more than 25 per cent in the past year, with investors opting for broad-based products as niche vehicles were among some of the worst-performing products available, according to Global X.
In its latest market report, the ETF provider stated the Australian market grew 27.3 per cent throughout the past year to $250.7 billion across 409 products, off the back of 106 consecutive months of net inflows.
“This was driven by $37 billion in net inflows, positive market movements and numerous unlisted active funds converting into active ETFs,” it said.
Among the best-performing ETFs were those with exposure to Chinese equities and gaming and esports companies.
“China was one of the top performers over the past year, rebounding strongly after a prolonged downturn,” the report noted.
“Investor sentiment improved with expectations of economic stabilisation and policy support, driving renewed foreign investment, particularly in technology, highlighted by the launch of DeepSeek and China’s growing role in artificial intelligence (AI).
“The gaming and esports sector also saw strong gains, led by [application developer and marketer] AppLovin’s 300 per cent share price surge due to strong earnings, advancements in its AI advertising engine and its addition to the Nasdaq 100 Index.”
On the flip side, ETFs with exposure to cryptocurrency, energy transition and clean energy were some of the poorest performers.
“After a strong performance in 2024, cryptocurrency ETFs pulled back due to risk-off sentiment,” Global X observed.
“While Bitcoin has remained positive over the past year, Ethereum has fallen approximately 47 per cent during the same period, with the latter facing scalability issues amid its transition to a proof-of-stake model, competition from newer blockchains and security concerns.
“Energy-transition and clean-energy ETFs remain among the poorest performers, affected by high interest rates, fading government support and supply-chain challenges. “
Looking at net flows, the investment firm pointed out broad-based index products, such as the Vanguard Australian Shares Index ETF and BetaShares Australia 200 ETF, continued to attract investors with net inflows of around $3.1 billion and $2.1 billion respectively, driven by a preference for simple vehicles with low fees.
“While there’s a growing choice of ETFs available, particularly among new active ETFs coming to market, uptake has been uneven as some active ETFs have faced sustained redemptions over the past year,” Global X said.
“This trend suggests that investors are sticking with the tried-and-true low-cost index ETFs that deliver predictable exposure at minimal cost.”