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"Bourgeoning tailwinds" to drive ETFs in 2013

Krystine Lumanta  |  26 Nov 2012Text size  Decrease  Increase  |  

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Krystine Lumanta is a journalist with InvestorDaily, a Sterling publication.


The Australian exchange-traded funds (ETFs) segment is likely to continue its strong growth in 2013, according to the ETF Consulting Australian ETF Outlook Report for November 2012.

"The key ingredients for acceleration of the ETP/ETF segment are evident and supportive of a strong 2013 for this segment," ETF Consulting's managing director Tim Bradbury said.

"More fund of choice, Future of Financial Advice implementation, dropping cash rates, greater awareness and education, and stabilising market sentiment are aligning to deliver a burgeoning tailwind for the ETF segment."

Exchange-traded product (ETP) assets under management have grown by 25 per cent to $6.15 billion over the past 12 months and there are over 84 ETPs on the Australian Securities Exchange, an increase of 50 per cent in the past 12 months.

The report also considered the debate around whether the ETF structure's success was structural or cyclical.

"Some advisers, who regarded the growth of ETFs in the post-global economic environment as nothing more than a short-term, cyclical phenomenon that would run out of steam when the market conditions returned to normal, are having second thoughts," the report said.

"Some are now realising that the rise of ETFs could be a permanent structural change after all."

In addition, the report highlighted the delay of institutional investors in taking up ETFs in Australia, while in overseas markets it was institutional investment that had powered early ETF adoption.

"Here, it has been retail or individual investors that have driven the rise of ETFs," Bradbury said.

"However, there are signs of wider institutional interest and increasing use of ETFs here, which will put more grunt behind the growth of the sector."

ETF Consulting recently facilitated the Australian ETF Network on LinkedIn as a vehicle for ETF education and knowledge.