Despite being a growing reservoir of funds under management, this critically important pool of capital is confronting mounting problems collating and disseminating key data in a timely manner.
The ratings house is pinning its growth strategy on a revamped methodology that increases the emphasis on governance to 25 per cent – a timely move considering APRA’s proposed reforms.
BetaShares says ETP market to jump again this year
Despite an end-of-year slowdown last quarter and lack of market price support for the year, Australia’s ETPs reached another record, up 13 per cent to $40.8 billion in total market cap in 2018. This was due solely to fund inflows. BetaShares is predicting an increase of between 22-34 per cent this year.
Alex Vynokur, BetaShares chief executive, says in the company’s monthly report, covering the 12 months to December, that: “We believe the industry will continue to grow strongly in 2019 and forecast total industry FuM at the end 2019 to be in the range of $50 billion [22 per cent rise] to $55 billion [34 per cent rise].”
He said the declines in asset prices muted the growth of the industry and therefore the industry forecast made in BetaShares’ year-end report for 2017 was not reached (a forecast of $47-$49 billion). “That said, fundamental unit growth will continue to support the industry’s rise, with extraordinary growth possible should asset values recover,” Vynokur said.
The Australian growth compares with a bigger slowdown in other major countries, which ended the year static compared with the previous 12 months. The global ETF market remains worth about US$4.8 trillion in market cap. “In our view, given the prevailing environment, this is a very strong result and indicates the continued interest in the ETF product structure by investors even in the face of very volatile markets,” Vynokur said.
By inflows, passive products captured the bulk of flows with 88% share, however the Active ETF sector continued to grow its relative share with 12 per cent of flows versus 8 per cent in 2017.
Within the passive category vanilla index-tracking funds once again dominated, with their share of flows remaining stable (78 per cent of flows in 2018 versus 79 per cent in 2017), as did the share of flows in ‘smart- beta’ products (9 per cent versus 8 per cent in 2017).
“That notwithstanding, we expect both active ETFs and ‘smart-beta’ funds to continue to grow in popularity as new products are launched and the industry matures,” the report said.
There were 38 new ETPs launched last year and seven closed, leaving a total of 247 ASX-listed funds as at December 31.
– G.B.
