Australian ETP Markets to Strike $200 billion as product number hits 350: Global X
The Australian exchange traded product (ETP) industry will reach a record $200 billion in size by 2025 with at least 350 products listed on the Australian Stock Exchange (ASX) and Cboe, with the sector likely to maintain a strong pace of growth despite volatile share markets, according to Global X ETFs Australia (Global X).
Kanish Chugh, Global X Head of Distribution, said ETP flows and market size will increase solidly this year as investors rationalise their investments and take advantage of the broadening range of exchange traded funds (ETFs) listed on the ASX. ETFs make up around 90% of the Australian ETP market.
“By 2025 we anticipate there will be more than 350 listed ETPs on the Australian market, which will be worth more than $200 billion. There are still gaps in the market for providers to list innovative investment solutions and ETFs are the most convenient and cost-effective vehicles for to Australian investors to build their portfolios,” Chugh said.
Over the 12 months to 24 March 2023, the Australian ETP industry jumped in size by 7.1 per cent to $136.2 billion, with 301 products listed, up 16 per cent from 244 a year earlier, according to data from the ASX. Even as stock markets shook throughout 2022, 42 new ETPs were launched and new asset classes added to the market, including cryptocurrency and carbon credit ETFs.
“There were also a significant number of environmentally conscious and sustainability focused ETFs launched, highlighting the shift in the ETF market to values-based investing,” said Chugh. “Australia was also the first nation in the Asia Pacific to list cryptocurrency ETFs, which highlights how local investors and providers are striving to innovate and leading the way in ETF product development and meeting investor demand.”
During the past 12 months, many investors turned to Australian equity ETFs to build their portfolios as Australian shares outperformed global markets, held up especially by resources shares, including gold miners. Other investors sought exposure in sustainable themes such as battery technology and lithium and with volatility short and long leveraged exposures saw increased trading.
“Looking ahead, Australian investors will be able to gain access to an ever-broadening range of ETFs to suit their investment needs and gain a better understanding of how to use ETFs to effectively build whole portfolios, rather than use actively managed funds or listed invested companies,” said Chugh.
“Global X has an exciting pipeline of products which will help enable this with already three ETFs launched on the ASX this year. Competition too is likely to increase in 2023 with the number of ETFs rising,” said Chugh.
To capture growth from the ETP market, Chugh predicts that more fund managers will enter the ETP market in 2023, whether they be active fund managers or passive managers.
“Given rising competition, investors need to look under the hood of ETFs to get a real understanding of the assets in which they are investing. On the provider side, it will become more important for ETP providers to deliver greater value to investors with a relevant point of difference,” said Chugh.
Global X has recently entered the Australian ETP market through the acquisition of ETF Securities through industry-leading parent company, Mirae Asset. Global X CEO Evan Metcalf said the local team is working closely with the Global X global research and product teams to educate investors about Global X’s innovative product range.
“We take an innovative approach to providing our investors with unique solutions created and backed by our extensive research capabilities and more than 20 years of experience in local market,” said Metcalf.
“Global X boasts a team of more than 30 research analysts globally across thematics, commodities, digital assets and income, which help us to provide leading ETF investment solutions to investors, who are flocking to ETFs at a growing rate. In contrast, demand for actively managed funds is under pressure as many funds underperform their benchmarks and charge higher fees than ETFs.”
Research from S&P Dow Jones Indices, the SPIVA® Australia Scorecard has found that during the first half of 2022, around 50 per cent of Australian equity funds underperformed the S&P/ASX 200. Over the same period, 40 per cent of Australian property trust funds underperformed their respective benchmarks, while a majority of funds lagged in the fixed income and small-cap equity categories. Over a longer period, most active funds underperformed in every reported category over longer-term horizons (three, five, ten and 15 years).
