Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 187

ETF industry predictions for 2017

The Exchange Traded Funds (ETFs) industry in Australia continues to evolve, as new waves of investors demand more sophisticated types of products.

With a new range of currency-hedged international funds and risk managed strategies, asset levels at an all-time high and more widespread, the Australian ETF industry came of age in 2016. It continues to follow in the footsteps of more mature markets around the globe, and ETFs now exceed $25 billion in Australia.

In 2017, we believe this more mature version of the local industry will be expressed in at least three clearly defined trends: 1) a growing audience of younger users; 2) the proliferation of active exchange traded managed funds; and 3) a broader range of smart-beta options.

These are our predictions to watch:

Prediction one: Millennials an important driver of growth of industry

Accounting for almost a third of the global population, the millennial generation (those born between 1980–2000) are entering into their prime earning years and will soon be the largest client-base in the financial markets. According to the Deloitte report Millennials and wealth management, millennials prefer self-directed options, and they expect seamless technologies that allow them to access investments quickly and easily throughout the investment cycle.

ETFs fit this segment. They are cost effective and allow investors to back their views across a number of asset classes and investment strategies.

In more mature markets, like the US, the figures prove that millennials are driving industry growth. According to the Schwab’s 2015 ETF Investor Study, younger investors in the US are more likely than older ones to use ETFs: 41% of millennials use ETFs, compared with 25% of Gen Xers and only 17% of Baby Boomers. Furthermore, 70% of millennials see ETFs as the core investment type in their portfolio in the future.

The trend in the US of ETF providers developing ETF model portfolios with automated distribution solutions could also play out in Australia, which would continue to empower millennials with innovative wealth management tools.

Prediction two: Active exchange traded managed funds will proliferate

Active exchange traded managed funds became more common in Australia in 2016 and they will grow substantially in 2017, as both investors and fund managers recognise the benefit of the exchange traded product structure.

Despite representing only 9% of the industry’s funds under management, the active exchange traded managed funds sector has generated strong flows with just under $1 billion invested to date.

Prediction three: More 'smart beta' products

ETFs have evolved from market capitalisation index trackers to investment solutions that answer a broad range of investor needs. Smart beta products –or those not market cap weighted– will be a product segment to watch in 2017 as more investors and advisers recognise the potential for these products to offer active-like returns for index-like costs.

A number of smart-beta products have performed exceptionally well in recent times, with many offering returns significantly above both market-cap indices while also placed amongst top quartile active managers.

Across all predictions, growth remains a consistent theme

The growth of the ETF industry in Australia has been phenomenal in recent years, and we predict it will continue on this strong trajectory in 2017, ending the year with $30-$33 billion funds under management and approximately 250 exchange traded products.

 

Alex Vynokur is Managing Director of BetaShares Capital Limited. BetaShares is a sponsor of Cuffelinks. BetaShares recently introduced another new ETF , the Global Sustainability Leaders (ASX:ETHI).

RELATED ARTICLES

The challenges of building a lazy portfolio

Global ETFs: insights into a multi-trillion-dollar industry

Australian ETFs: end of year reviews 2018

banner

Most viewed in recent weeks

Australian house prices close in on world record

Sydney is set to become the world’s most expensive city for housing over the next 12 months, a new report shows. Our other major cities aren’t far behind unless there are major changes to improve housing affordability.

The case for the $3 million super tax

The Government's proposed tax has copped a lot of flack though I think it's a reasonable approach to improve the long-term sustainability of superannuation and the retirement income system. Here’s why.

7 examples of how the new super tax will be calculated

You've no doubt heard about Division 296. These case studies show what people at various levels above the $3 million threshold might need to pay the ATO, with examples ranging from under $500 to more than $35,000.

The revolt against Baby Boomer wealth

The $3m super tax could be put down to the Government needing money and the wealthy being easy targets. It’s deeper than that though and this looks at the factors behind the policy and why more taxes on the wealthy are coming.

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

The super tax and the defined benefits scandal

Australia's superannuation inequities date back to poor decisions made by Parliament two decades ago. If super for the wealthy needs resetting, so too does the defined benefits schemes for our public servants.

Latest Updates

Planning

Will young Australians be better off than their parents?

For much of Australia’s history, each new generation has been better off than the last: better jobs and incomes as well as improved living standards. A new report assesses whether this time may be different.

Superannuation

The rubbery numbers behind super tax concessions

In selling the super tax, Labor has repeated Treasury claims of there being $50 billion in super tax concessions annually, mostly flowing to high-income earners. This figure is vastly overstated.

Investment strategies

A steady road to getting rich

The latest lists of Australia’s wealthiest individuals show that while overall wealth has continued to rise, gains by individuals haven't been uniform. Many might have been better off adopting a simpler investment strategy.

Economy

Would a corporate tax cut boost productivity in Australia?

As inflation eases, the Albanese government is switching its focus to lifting Australia’s sluggish productivity. Can corporate tax cuts reboot growth - or are we chasing a theory that doesn’t quite work here?

Are V-shaped market recoveries becoming more frequent?

April’s sharp rebound may feel familiar, but are V-shaped recoveries really more common in the post-COVID world? A look at market history suggests otherwise and hints that a common bias might be skewing perceptions.

Investment strategies

Asset allocation in a world of riskier developed markets

Old distinctions between developed and emerging market bonds no longer hold true. At a time where true diversification matters more than ever, this has big ramifications for the way that portfolios should be constructed.

Investment strategies

Top 5 investment reads

As the July school holiday break nears, here are some investment classics to put onto your reading list. The books offer lessons in investment strategy, financial disasters, and mergers and acquisitions.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.