Our Terms & Conditions | Our Privacy Policy
The Australian exchange traded fund (ETF) market has grown by 48.6% over the past year, reaching A$226.6 billion ($151.6 billion) across 394 products, according to the latest Global X market report.
The market surpassed A$200 billion in the first half of 2024, a significant milestone as the ETF market took nearly 20 years to achieve the first A$100 billion, but the subsequent A$100 billion was added in just over three years, said the report.
While domestic retail investors represent around 70% of inflows, the opportunities for Asian institutions and global asset managers are also significant for Asia-Pacific’s fourth-largest ETF market, according to Lisa Lautier, partner in the asset management and investment funds practice at law firm K&L Gates.
Lisa Lautier
K&L Gates
“Australia has two exchanges that offer well established processes that can get products to market quickly,” Lautier told AsianInvestor.
Australia also has a regulatory framework that is relatively friendly compared with many of its counterparts, offering not only traditional asset classes but also less traditional asset classes such as cryptocurrency. These factors could prove advantageous for Asian managers, she said.
“Depending on tax structuring, there could be an opportunity to set up a master-feeder structure, where a manager might have an ETF listed in another Asian jurisdiction, and that manager could explore establishing a locally domiciled fund in Australia that provides indirect exposure to that ETF,” said Lautier.
“This would involve taking an existing successful strategy and exploring whether the Australian market is interested in indirectly investing in that Asian market.”
With global equities representing a significant portion of the Australian ETF market, there is a real opportunity for managers with expertise investing in Asian markets according to Matthew Watts, partner in the asset management and investment funds practice at K&L Gates.
“Through the use of this master-feeder structure, we see a real opportunity for Asian managers with expertise that may not necessarily be widely available in Australia to utilise their existing capabilities to manage the ETF portfolio or part of it from outside of Australia,” Watts told AsianInvestor.
INSTITUTIONAL INVESTORS
Pension funds, particularly self-managed superannuation funds (SMSFs), and institutional investors are also increasingly turning to ETFs for diversification, liquidity, and cost-effective exposure, according to David Bassanese, chief economist at one of Australia’s largest ETF providers, Betashares.
“In Australia, self-managed super funds were the early adopters of ETFs. If you’re running your own self-managed super fund, ETFs are great because you can have a very diversified portfolio at very low cost using just a handful of investments,” Bassanese told AsianInvestor.
David Bassanese
Betashares
The rise of active ETFs has been particularly attractive to institutional investors.
According to the ASX’s ETF Market Report 2024, active ETFs now account for approximately 30% of the Australian ETF market.
“Asian asset managers with active management expertise could certainly take advantage of this trend,” said K&L Gates’ Watts.
A stronger focus on environmental, social, and governance (ESG) factors is also driving institutional adoption of ETFs, according to a recent study by KPMG.
The research found that 85% of Australian institutional investors consider ESG factors in their investment decisions, leading to an increase in ESG-focused ETFs in the market.
MARKET DYNAMICS
The regulatory environment in Australia has been conducive to the growth of the ETF market, creating a favourable landscape for Asian asset managers looking to enter the market, according to Watts.
“We saw Bitcoin ETFs approved quite quickly, slower than the US but ahead of other jurisdictions,” he said.
This regulatory support extends to product launch facilitation by the Australian Stock Exchange and Cboe.
Matthew Watts
K&L Gates
“They work in a way that encourages and assists managers to get to market as quickly as they can, rather than putting up barriers,” said Watts.
Both Watts and Lautier said they have observed a rising trend of fund managers looking to enter the ETF market.
“In Australia there is a real sense that this is where the future is, given the recent outflows from managed funds and significant inflows to ETFs. We’re seeing managers who don’t yet have an ETF offering in Australia expressing an interest to enter the ETF market and in many cases now taking steps to launching their first one. Of particular interest is the number of offshore clients we have looking to set up ETFs in Australia,” said Watts.
The market is also seeing strategic moves by major players.
“BetaShares recently acquired a superannuation fund, which is one of the first in the industry” said Lautier.
It will be interesting to see what they do with that, particularly in terms of how they intend to restructure what the superannuation fund offers.”
¬ Haymarket Media Limited. All rights reserved.
Images are for reference only.Images and contents gathered automatic from google or 3rd party sources.All rights on the images and contents are with their legal original owners.
Aggregated From –
Comments are closed.