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The 5 ETFs drawing in Aussie investors

Emma Rapaport  |  07 May 2019Text size  Decrease  Increase  |  
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The newest and cheapest broad market Australian shares exchanged-traded-fund caught the eye of local investors over the quarter, attracting inflows of $108 million.

The BetaShares Australia 200 ETF (ASX: A200), launched in May last year, raced to $500 million in funds under management in only 11 months, making it the fastest ever Australian ETF to reach this milestone, according to the firm.

Morningstar associate director, manager research Alexander Prineas says BetaShares’ success over the quarter shows that while ETFs is a scale game, shrewd disruptors can unseat the international behemoths.

A200's total inflows still pale in comparison to Australia’s largest ETF, SPDR S&P/ASX 200 (ASX: STW), which has about $3.7 billion in assets.

BetaShares charges 0.07 per cent annually for A200, making it cheapest of the broad market ETFs. It is half the cost of its nearest rival, the Vanguard Australian share ETF (ASX: VAS), which charges 0.14 per cent.

"Rival exchange-traded funds were already cheap, but BetaShares has taken cost to a new low, charging less than half the price of the nearest rival," says Prineas.

"BetaShares Australia 200 ETF A200 gets our attention, and it should grab yours, too."

A200 offers a diversified Australian equity portfolio. It tracks the lesser known Solactive Australia 200 Index, but Prineas insists there is little to separate this benchmark from established indexes such as the S&P/ASX 200 Index.

"There are minor differences—for example, S&P uses a relative measure of liquidity, while Solactive’s index requires an absolute minimum amount of liquidity before a stock is included," he says.

"In reality there is little difference in the index constituents—both benchmarks are driven by a market-cap methodology that offers exposure to 200 of Australia’s largest companies."`

BetaShares CEO Alex Vynokur

BetaShares co-founder and chief executive Alex Vynokur (pictured) says the company has seen widespread adoption among retail and institutional investors alike for A200

Analysts have awarded A200 a Bronze rating, reflecting the fact that Morningstar's preferred active managers have beaten Australian equity benchmarks over the long run, even after accounting for their higher cost.

"However, not all active funds consistently deliver, so good quality passive vehicles such as A200 stack up well against the average fund," Prineas says.

Largest ETF inflows by estimate net flow, Q1 2019

ETF inflows quarterly top

Source: Morningstar Direct

BetaShares was launched in 2010 by Vynokur, David Nathanson and Ilan Israelstam. The firm offers 51 ETFs and is known for having introduced a range of products into the Australian ETF market.

BetaShares Capital has now narrowly overtaken State Street Global Advisors (Australia) as the third largest provider of ETFs in the Australian market behind Vanguard Investments Australia and iShares, with total net assets of $6.3 billion. VanEck Investments Limited comes in fifth with $2.3 billion total net assets.

Correction: an earlier version of this story stated that the Vanguard Australian Shares ETF fund had the highest outflows for the quarter. It in fact had inflows of $67 million. The error occurred in the production process.

is a reporter for Morningstar.com.au

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