‘Only the beginning’: Australia’s ETF industry shows no sign of slowing, as market capitalisation reaches a new record of $126.9 billion

‘Only the beginning’: Australia’s ETF industry shows no sign of slowing, as market capitalisation reaches a new record of $126.9 billion
(Image by Louis Douvie, SMH)
  • Australia’s ETF industry broke yet another record through October, as investors of all ilks continue to flock to the product.
  • Meanwhile, monthly trading value also dropped slightly, by 12%, after a significant spike in trading in September, but still remains high at around $8 billion relative to the market’s monthly averages.
  • Ilan Israelstam, chief commercial officer at ETF provider BetaShares, said the market is likely to see month-on-month records broken through the months ahead, as a steady rate of new ETFs hit exchanges, and the Australian market catches up with markets like the US.
  • Visit Business Insider Australia’s homepage for more stories.

After investors “bought the dip” and drove record in-flows into the Australian ETF industry in September, market capitalisation — the value of the underlying products plus the inflows from investors — reached a record-high just one month later, even as the Australian sharemarket lulled. 

As October drew to a close, the Australian ETF industry set a fresh market capitalisation record of $126.9 billion, up $1.7 billion on the $125.3 billion recorded in September. 

Ilan Israelstam, chief commercial officer at ETF provider BetaShares, told Business Insider Australia that the last four months have been a boon for ETFs in Australia, where herds of first-time retail investors and a recent surge in institutional investment could see records set for months to come. 

“I think more and more investors of all shapes and sizes are using them to express their views,” Israelstam said. 

“Whether it be financial advisers using them more in their practices, or self-managed super fund investors taking them up, in some cases it’s becoming the default way they [are starting to] invest.”

Total in-flows across the ETF industry were $2.4 billion through October, down slightly on September’s $2.9 billion record. 

Meanwhile, monthly trading value also dropped slightly, by 12%, after a significant spike in trading in September, but still remains high at around $8 billion relative to the market’s monthly averages. 

Even still, Israelstam said the market is likely to see month-on-month records broken through the months ahead, as a steady rate of new ETFs hit exchanges, and the Australian market catches up with markets like the US, where the product has seen surging popularity. 

“I mean, we think there’s a huge way to go. In the industry, in terms of growth, we usually look at things like what percentage of the market cap is made up of ETFs in places like Canada, or the US, and compare that to Australia,” Israelstam said. 

“So the actual number of investors on a relative basis is still very low compared to the number of investors we could get if we reach similar levels of penetration to those countries with more mature ETF industries. 

“We do actually expect that these records will continue to be broken for quite some time.”

Product development activity stood firm through October, which saw four new funds launched, including a new Active ETF by Global Equities manager Loomie Sayles. Though, it was the ETFs that gave investors exposure to the hydrogen sector that performed best. 

But investors continued to pour their cash into Australian and international equities, which attracted $621 million and $904 million in investment respectively. 

Cash ETFs and Fixed Income ETFs, however, also attracted high levels of flows, at $345 million and $304 million respectively, while the AAA Cash ETF received the most, jumping two ranks through October.

The popularity of the industry’s product mix is expected to take yet another turn once November draws to a close and results are in on the Australia’s first crypto-focused ETFs, which each broke records in early trading last week

The new BetaShares ETF, which started trading under the ticker ‘CRYP’ last Thursday, debuted on the Australian Stock Exchange (ASX) at 10.30am on for $11.23 per unit, and saw trading volume skyrocket to $8 million just 15 minutes later. 

According to Bloomberg data, the product’s trading volume skyrocketed to $24.5 million by midday, before shooting up again to $28 million by 1pm. By close of trading, investors had poured more than $42 million into the index.

CRYP’s trading volume set a new record for an ASX-listed ETF on Thursday, after Hyperion booked $8 million worth of trading on the first day its Global Growth Companies Fund started trading. 

BetaShares, which by Tuesday had traded more than $100 million, wasn’t alone in breaking exchange records with the launch of a crypto-focused ETF. 

Five days after it was listed, Cosmos Asset Management’s DIGA ETF has become the best performing ETF in the Australian ETF market, across all exchanges, with a 25% return on a listed price of $5. 

The Cosmos ETF almost doubled the return of Australia’s previous leader, HGEN, which held a five-year return record of 12.6 % over a five-day period.