By John Collett
The Australian exchange-traded funds (ETFs) market has surged from strength to strength in the past 12 months reaching a total value of just under $200 billion, aided by a strong showing from bitcoin-linked funds.
As of March 31, the ETF market was at $197 billion, an increase of almost 38 per cent over the past year and almost twice the market’s value three years ago.
The best-performing Australian-listed ETFs in the 12 months to March 31 were those with exposure to crypto.Credit: AP
The increase in the value of the ETF market reflects not only the inflows of money by investors but also asset value movements and unlisted managed funds that have converted into ETFs.
The best-performing Australian-listed ETF over the period was the Global X 21Shares Bitcoin ETF, which returned 168.3 per cent, as the bitcoin price rose in response to the launch of US-listed bitcoin ETFs earlier this year.
Bitcoin is about to experience a “halving” event, which significantly reduces the supply of new bitcoin – another likely reason for its strong performance.
Marc Jocum, product and investment strategist at Global X, which provided the figures, says there is plenty of potential for the Australian-listed ETF market to maintain its rapid growth, as the local market is relatively immature.
Global X’s Marc Jocum estimates the local ETF market could reach $1 trillion by 2030.
“In the United States, the listed ETF market accounts for about a quarter of the value of all collective investments; whereas, in Australia, it accounts for only 5 per cent,” Jocum says.
In Jocum’s estimation, the local ETF market could reach $1 trillion by 2030 if the market continues to grow at the same pace, as investors seek out low-cost investments, whose units are bought and sold just like shares in listed companies.
Betashares’ Crypto Innovators ETF was second, with a return of 161 per cent. The Global X 21Shares Ethereum ETF returned 108.5 per cent to take third spot, with the Global X Ultra Long Nasdaq 100 Hedge Fund placing fourth with 104.1 per cent, followed by the Global X FANG+ ETF with a return of 76 per cent.
The worst performer during the 12 months was the Global X Ultra Short Nasdaq 100 Hedge Fund, with a return of minus 57.2 per cent. The Betashares US Equities Strong Bear Hedge Fund was second worst, with a return of minus 44.4 per cent.
ETFs that hold shares in clean energy companies recorded losses of between 20 and 30 per cent during the 12 months.
Most ETFs track or mirror the returns of a market, whether it is a benchmark sharemarket index, sub-index or the price of a particular commodity, or precious metal such as gold.
Some invest in global themes that invest in companies around the world, such as ethical investing and in “megatrends”, such as cybersecurity, clean energy or cloud computing.
The figures show “vanilla” ETFs that track the returns of the Australian sharemarket enjoyed the biggest inflows during the year.
The Vanguard Australian Shares Index ETF, which tracks the S&P/ASX 300 index, received $1.8 billion worth of inflows from investors during the 12 months.
The Betashares Australia 200 ETF and iShares Core S&P/ASX 200 ETF received the second and third-most inflows to individual Australian-listed ETFs.
Overall, total inflows into Australian-listed ETFs that hold global shares was $6.5 billion, followed by inflows of $6 billion into ETFs that hold Australian shares.
Since the start of this year, more than $50 million has flowed into Australian-listed semiconductor ETFs, signalling the interest in companies that make the advanced computer chips needed to train and run artificial intelligence networks, like US firm Nvidia.
Over the same period, more than $30 million flowed into Australian-listed cybersecurity ETFs.
- Advice given in this article is general in nature and not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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