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Australian ETF Review – December 2020 and year-end

2020 was a standout year globally for ETFs, with the pandemic causing investors to turn to the liquidity and accessibility of ETFs in their droves in incredible volatile conditions. It was also a year that finally silenced the sometimes outspoken critics of ETFs, some of whom had claimed that the investment vehicle had never been tested during stressful periods. In fact, ETFs globally coped admirably and reliably as investors bought and sold ETF holdings in record amounts during the ‘virus crises’.

The Australian ETF industry which started the year at $62B ended up >50% higher, $95.2B, an all-time high, although admittedly this included a large conversion event by Magellan which immediately added ~$13B to the industry. Excluding this event the industry grew by a still-rapid 32% p.a.The change in total industry size for the year was $33B which is by far the highest annual change on record.

Perhaps the most striking feature however, of the industry’s growth in 2020, is that it was entirely driven by net inflows rather than asset value appreciation, with $20.5B of new money flowing into the industry over the course of the year. This represents by far and away the highest annual inflows on record, representing a 59% increase in flows from the previous year’s figure.

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