ETFS RACE AHEAD OF OLDER LICS

The ETF sector continues to grow strongly, with the total funds under management ($42.3 billion) exceeding that of the 82-year-old listed investment company (LIC) market by a good $60 million. The first LIC was listed in Australia in 1936 and the first ETF in 2001. Since the GFC in 2008 the ETF market has grown at an average of 39%pa compared with a more subdued 11.5%pa for LICs. A critical part of the appeal of ETFs is their cost effectiveness, according Alex Vynokur, CEO of BetaShares. The average asset-weighted fee in the ETF industry is 0.22%pa versus the average LIC fee of 0.66%pa, excluding any performance fees. There are double the number of ETFs, with 241 listed on the ASX compared with 110 LICs. Vynokur predicts that the ETF industry will continue to grow quickly and expects it to be double the size of the LIC market within four or five years.