FUNDS ETFs keep the cash rolling in

The Australian exchange traded funds industry had $13.5 billion of net inflows in 2022. In contrast, managed funds had their worst year on record with $26.8 billion net outflows.

Further, ETFs have received higher flows than unlisted funds in four of the past five years. Over this period, ETFs received cumulative flows of $71 billion, compared with $3 billion for unlisted funds.

Consistent with the positive net flows, a review by BetaShares says there was growth in the number of Australian ETF investors. There are now 1.9 million Australians investing in ETFs, representing investor growth of 6% year over year.

Still, despite positive net flows, falling markets caused the ETF industry to decline 2% in value. Funds under management (FUM) fell from $137 billion to $133.7 billion in 2022.

BetaShares chief commercial officer Ilan Israelstam says that while he had expected that market conditions would hinder the growth of the ETF industry, the extent of declines that ultimately led to a small drop in the industry’s value was unexpected.

Meanwhile, the value of ETFs traded on the Australian exchange reached an all-time high: $117 billion compared with $95 billion the year before.

At an issuer level, the ETF industry’s flows were the most concentrated on record; Vanguard and BetaShares received 90% of the net inflows.

As for product launches, it was the biggest year on record, with 52 new ETFs listing on Australian exchanges in 2022.

Israelstam says he expects conditions to impede the growth of the ETF industry. However, he also predicts that net inflows will remain positive, leading to the industry returning to a growth footing.

BetaShares forecasts total industry FUM to exceed $150 billion in assets by the end of 2023.