Exchange trade funds to over take listed investment companies by 2018
Exchange traded funds (ETFs) are poised to overtake listed investment companies as the most popular pooled investment option on the ASX within two years if current trends persist.
ASX data for November shows that the value of ETFs rose by 17 per cent to $24.5 billion, while the value of listed investment companies rose just 2.3 per cent to $30.5 billion.
Experts point to the increasing sophistication of investors, regulatory change, growing numbers of ETF strategies available at low cost and the rise of the self-managed super fund as among the key forces driving ETF fund flows.
Listed investment companies, which have a long history of performing for retail funds, charge comparatively higher fees and can trade at a premium or a discount to underlying value, which can be frustrating for investors.
Australian ETF specialist BetaShares has been one of the key beneficiaries of this trend. Established in 2009 as a provider of exchange traded funds, BetaShares has grown to manage more than $3 billion in a short period of time.
It is the fourth largest Australian ETF provider behind global funds management giants BlackRock, Vanguard and State Street.
Ilan Israelstam, head of strategy and marketing at BetaShares, says that although firm has benefited from a huge surge of interest in ETFs the firm has deliberately tried to avoid duplicating some of the more popular ETF strategies.
“We are not trying to compete head to head with Vanguard or Blackrock. We are are plugging gaps or creating new strategies. A lot of the things we do are things that are very difficult for individual investors to do,” Mr Israelstam said.
“Take our short strategy. Our bear fund was the first time an individual investor could really go about shorting the market if they had a strong view. It’s about democratising strategies that were once only available to a select few.”
‘Not even close to the peak’
Over the past 12 months there were more trades in BetaShares ETFs than in the ETFs of any other provider, with 22,602 transactions made to November 30.
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