Money flows indicate the future is now
Exchange traded funds, or ETFs, are surging in Australia. When the first product was launched in 2001 – over the ASX/S&P 200 – inflows were initially slow, with their popularity nothing like it was in the US.
But they seem to be finally be having their day with more and more investors now using them, not just for a satellite allocation, but also for the core of their portfolio. Funds under management in exchange traded products – which includes ETFs, listed managed funds and listed structured products – were $47.66 billion at the end of April 2019 and there is now such an array of products (151 ETFs) – that robo advice models can rely entirely on ETFs to cover all asset classes for investors seeking a hands-off approach to investing. Robo advice operator StockSpot launched in 2013 and currently has approximately 2700 clients investing with it, according to Sarah King, head of advice and client care.”We’ve had a big interest and it’s definitely growing and growing and that’s from really young investors up to sophisticated SMSF clients,” she says.She believes there is a massive shift of money coming out of actively managed funds and into ETFs as investors look to manage their fee budget more effectively and get more bang for their buck. Head of ETF Securities Australia Kristian Walesby says: “[They were launched] around 20 years ago in Australia but they were the very basic ETFs at the beginning and its taken quite a lot longer in Australia for investors to start using them with the same level of comfort that you see in the US, Europe and, to a certain extent, parts of broader Asia.”
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