Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 285

Predictions for ETFs in 2019

Australia’s ETF industry is predicted to continue its rapid growth trajectory in 2019, driven by investor demand, product innovation and the evolving requirements of advice models used by financial planners.

This year to November, the Australian ETF industry continued its growth trajectory, finishing the month at $41.1 billion, up from $35.5 billion as at 30 November 2017 and in line with BetaShares’ 2018 predictions made in late 2017. More investors appear to be recognising the benefits of ETFs, including the ability to diversify portfolios, lower costs and access opportunities in international sectors which have historically been hard for Australians to access.

For the upcoming year, we’re highlighting ETF model portfolios, increased allocations to fixed income ETFs and global growth thematics as themes.

Prediction one: Adoption of ETF model portfolios

Adoption of ETF model portfolios is predicted to increase, as advisers seek to create efficiencies in their businesses and lower costs for clients, and as more ETF strategists, investment consultants, portfolio construction specialists and robo advisers enter the market.

2018 has seen a strong rise in the number of advisers and investors seeking to implement expert portfolios via models, and we ourselves have seen significant growth in advisers using our ETF Model Portfolio service offered to them. This demand is primarily coming from groups who are seeking to use such services to offer efficient and cost-effective access to diversified investment portfolios, at much lower costs for clients than had been previously available.

It is becoming increasingly understood in the Australian market that the combination of low-cost index building blocks and active asset allocation can result in a compelling investment solution that delivers value for both the end client and the adviser, and so we predict this theme to grow strongly.

Prediction two: Fixed income exchange traded products growing in popularity

Last year our second prediction was for greater innovation in fixed income exchange traded products and there is no doubt that prediction has come true, with a number of innovative solutions offered to the market in 2019.

We believe the adoption of ASX-traded fixed income funds will rise significantly in 2019, both due to increased product choice but also signalling changing sentiment from investors looking to position portfolios more defensively.

Australian investors typically hold an underweight exposure to fixed income, although, with growing market volatility, investors are starting to increase allocations to fixed income as a defensive shield for their portfolios. We’ve already seen this start to happen with the Fixed Income category continuing to be amongst the top 3 for asset flows each month.

In addition, the growing number of Australians reaching retirement age means that defensive asset classes such as fixed income will likely continue to benefit from increased allocations.

Product innovation is also predicted to continue, after this year’s significant growth in existing bond solutions including our Australian Bank Senior Floating Rate Bond ETF (QPON) and our Australian Investment Grade Corporate Bond ETF (CRED) which, combined, currently sit with over $450 million in assets.

We also saw the recent launch of Australia’s first fixed income Active ETF, the BetaShares Legg Mason Australian Bond Fund (managed fund) (BNDS), which offers investors access to an actively managed bonds portfolio via the ASX.

Fixed income has long been an overlooked allocation, primarily due to access issues. ETFs are reducing barriers to adoption across a variety of different asset classes, including fixed income.

Prediction three: Thematic investing will continue to grow

A record number of thematic ETFs were launched during 2018 and have experienced strong take-up to date. This trend is predicted to continue into 2019.

We continue to see strong demand for funds offering access to a range of global growth themes, including global cybersecurity (HACK)global healthcare (DRUG) and global robotics and artificial intelligence (RBTZ).

At the same time, the bellwether Nasdaq 100 ETF, NDQ, has seen a record year of inflows in 2018. Indeed together, the technology range has combined assets of over half a billion dollars as at 30 November.

In terms of a newer exposure that is quickly gaining popularity, more recently, valuations in the Asian technology sector have become more attractive. This has underpinned a strong period of growth in the adoption of the Asian Technology Tigers ETF (ASX: ASIA), which allows investors to access a portfolio of the largest Asian tech companies in a single trade.

Overall, Australia’s ETF industry is headed into another strong year for growth

We predict the ETF industry will end 2019 at $55-60 billion versus $41 billion as at November 2018.

 

Alex Vynokur is Managing Director of BetaShares Capital, a sponsor of Cuffelinks. This material has been prepared as general information only, without reference to your objectives, financial situation or needs. You should seek your own financial advice before making any investment decision.

For more articles and papers from BetaShares, please click here.


 

Leave a Comment:

     

RELATED ARTICLES

Alex Vynokur: ETFs deliver what’s written on the can

How to generate income without equity risk

banner

Most viewed in recent weeks

Too many retirees miss out on this valuable super fund benefit

With 700 Australians retiring every day, retirement income solutions are more important than ever. Why do millions of retirees eligible for a more tax-efficient pension account hold money in accumulation?

Is the fossil fuel narrative simply too convenient?

A fund manager argues it is immoral to deny poor countries access to relatively cheap energy from fossil fuels. Wealthy countries must recognise the transition is a multi-decade challenge and continue to invest.

Reece Birtles on selecting stocks for income in retirement

Equity investing comes with volatility that makes many retirees uncomfortable. A focus on income which is less volatile than share prices, and quality companies delivering robust earnings, offers more reassurance.

Welcome to Firstlinks Election Edition 458

At around 10.30pm on Saturday night, Scott Morrison called Anthony Albanese to concede defeat in the 2022 election. As voting continued the next day, it became likely that Labor would reach the magic number of 76 seats to form a majority government.   

  • 19 May 2022

Keep mandatory super pension drawdowns halved

The Transfer Balance Cap limits the tax concessions available in super pension funds, removing the need for large, compulsory drawdowns. Plus there are no requirements to draw money out of an accumulation fund.

Comparing generations and the nine dimensions of our well-being

Using the nine dimensions of well-being used by the OECD, and dividing Australians into Baby Boomers, Generation Xers or Millennials, it is surprisingly easy to identify the winners and losers for most dimensions.

Latest Updates

SMSF strategies

30 years on, five charts show SMSF progress

On 1 July 1992, the Superannuation Guarantee created mandatory 3% contributions into super for employees. SMSFs were an after-thought but they are now the second-largest segment. How have they changed?

Investment strategies

Anton in 2006 v 2022, it's deja vu (all over again)

What was bothering markets in 2006? Try the end of cheap money, bond yields rising, high energy prices and record high commodity prices feeding inflation. Who says these are 'unprecedented' times? It's 2006 v 2022.

Taxation

Tips and traps: a final check for your tax return this year

The end of the 2022 financial year is fast approaching and there are choices available to ensure you pay the right amount of tax. Watch for some pandemic-related changes worth understanding.

Financial planning

Is it better to rent or own a home under the age pension?

With 62% of Australians aged 65 and over relying at least partially on the age pension, are they better off owning their home or renting? There is an extra pension asset allowance for those not owning a home.

Infrastructure

Listed infrastructure: finding a port in a storm of rising prices

Given the current environment it’s easy to wonder if there are any safe ports in the investment storm. Investments in infrastructure assets show their worth in such times.

Financial planning

Power of attorney: six things you need to know

Whether you are appointing an attorney or have been appointed as an attorney, the full extent of this legal framework should be understood as more people will need to act in this capacity in future.

Interest rates

Rising interest rates and the impact on banks

One of the major questions confronting investors is the portfolio weighting towards Australian banks in an environment of rising rates. Do the recent price falls represent value or are too many bad debts coming?

Sponsors

Alliances

© 2022 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. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). 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.

Website Development by Master Publisher.