Global ETFs surge ahead

ETF Update - Quarter 3, 2017
 
Our quarterly update on the Australian ETF market as at September 2017.

ETF market highlights

  • Quarterly growth for ETFs listed in Australia was 8.9%, from $29.3 billion at the end of June to $31.7 billion at the end of September 2017.
  • The total size of global share ETFs listed on the ASX overtook Australian share ETFs for the first time. Global share ETFs continue to be embraced by Australian investors for better diversification in their portfolios.
  • The latest report from S&P showed that 75% of Australian equity managers, 90% of Global share managers and 86% of Bond managers underperformed their respective benchmarks over the 10 years to 30 June 2017. This trend has continued to support evidence based investing using ETFs.

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ETFs trump managed funds in 2016

ETF Update - Quarter 4, 2016
 
Our quarterly update on the Australian ETF market as at December 2016 and performance of the Stockspot portfolios.

ETF market highlights

  • Quarterly FUM growth was +7%, from $23,971 million at the end of September to $25,291 million at the end of December 2016.
  • Total ETF FUM has now reached the $25 billion milstone, including adding almost $4.3 billion in 2016.
  • The top 5 ETFs for the past 12 months have all been resources focused, reversing a 5 year period of underperformance since 2010.
  • After some US election volatility, Australian and global share ETFs showed steady inflows during November and December.
  • Overall we have seen another positive quarter for ETF FUM growth and returns, continuing the steady drive forward of the Australian ETF market.
  • Globally investors have put more money into ETFs than actively managed funds in 2016 for the 10th straight year.

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Investment update: US election

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Does this feel like deja vu? After the market reaction to Brexit earlier this year, the US election result seems like we’ve been down this road before.

Unexpected political result causes wild market movements

Before you make any investment decisions based on politics, it’s worth considering what it actually means for your investments over the long-run. The answer, which may surprise you, it’s actually very little.

Market commentators and your emotions may lead you to believe the different policy positions (and personalities) of the candidates will lead to different market returns. However, history repeatedly shows us markets will overreact in the short term and pay no attention after that. In fact, investment markets often move in the opposite direction to what you would expect due to currency movements or because everyone is already positioned one way.

Take Brexit as a perfect recent example. After the surprise Brexit result, which was considered by many ‘investment experts’ to be a disaster for the UK economy, British shares rose 25% over the next 3 months.
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Australian ETFs add $10 billion in 2 years

ETF Update - Quarter 3, 2016
 
Our quarterly update on the Australian ETF market as at October 2016.

Highlights

  • ASX-listed ETFs have added $10 billion in new funds under management since October 2014, representing 31% p.a. growth.
  • Quarterly growth of ETF funds under management was 7%, from $22,404M in June 2016 to $23,971M by the end of September 2016.
  • After some volatility in the first half of September, the Australian share-market stabilised near a 12 month high.
  • Gold and small Australian shares have performed best over the last year with oil, ‘Bear’ and some currency ETFs performing worst.
  • Fixed income ETFs continued to attract new funds at the fastest rate of all sectors as more investors and Self Managed Super Funds (SMSFs) add fixed interest to their portfolios to balance equity risk.

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Investment update: UK Exit (Brexit)

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The UK voted to leave the European Union after 43 years of membership. This surprised markets which had assumed only a small chance of the UK leaving.

What does it mean?

Nobody actually knows what the medium to long term implications are for the UK or global economy, due to uncertainty around how the exit will play out.

Not surprisingly share markets reacted negatively with all global markets initially falling. The good news is defensive assets like bonds and gold rose. Both assets are key parts of Stockspot’s portfolios and have helped minimise the impact of share market falls.
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ETFs surge 6% in May

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Our update on the Australian ETF market as at June 2016.

Highlights

  • ASX listed ETFs grew by $1.35 billion for the month as confidence returned to share markets after a surprise interest rate cut and expectations of low interest rates remaining.
  • Monthly FUM growth was 6%, from $21,905M in April to $23,162M by the end of May 2016.
  • Broad market and sector ETFs were the best performers both locally and internationally.
  • Australian property ETFs continue to lead on 12 month performance due to falling interest rates.
  • The BetaShares Cash ETF (AAA) saw a rare month of outflows due to a surprise cut in interest rates.
  • MarketVectors rebranded to its parent company name – VanEck to become VanEck Vectors.
  • BetaShares launched 2 ETFs in a partnership with major USA-based issuer WisdomTree.

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Bond ETFs grow in popularity

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Our update on the Australian ETF market as at April 2016.

Highlights

  • Growth in funds under management (FUM) across all ASX listed ETFs was 3% for the month, from $20,585M in February 2016 to $21,299M by the end of March 2016.
  • Australian shares regained some popularity relative to international share ETFs after the Australian dollar rose strongly – reducing some of the short term appeal of global stocks.
  • After two strong months, flows into Gold ETFs slowed as the metal took a breather. Bond and cash ETFs attracted the majority of defensive flows over the month.
  • Perceived defensive sectors including property and consumer staples continue to outperform resources and attract the majority of sector-specific interest.

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Share market ETFs begin to bounce back

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Our update on the Australian ETF market as at March 2016.

Highlights

  • Monthly FUM growth was 1%, from $20.4 billion in January to $20.6 billion by the end of February 2016.
  • Fixed income and cash is now the third largest ETF sector by FUM, inching ahead of Australian Shares (strategies) as ‘smart beta’ strategies continue to underperform and see outflows. We wrote in January that just 3 smart beta ETFs outperformed the market over 12 months compared to 10 which generated inferior performance.
  • The recent market weakness has started to reverse with fund inflows and positive returns across most sectors for the month.
  • Investors are starting to rotate out of some defensive ETFs including high yield and US Dollar ETFs.

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Defensive ETFs take the spotlight as fees fall further

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Our update on the Australian ETF market as at February 2016.

Highlights

  • Monthly FUM growth was negative for the first time since August 2015. Funds invested in ASX listed ETFs fell -4%, from $21,335M in December 2015 to $20,403 at the end of January 2016. Most of the impact came from market falls since the majority of ETFs still attracted new inflows for the month.
  • Vanguard became the second largest ETF issuer by FUM in Australia, inching ahead of SPDR.
  • Several ETF reduced their Management Expense Ratios (MERs) including a Stockspot portfolio inclusion – the iShares Composite Bond ETF (IAF) from 0.24% to 0.20%.
  • iShares has now reduced fees for 14 of its ETFs in the past 2 months while SPDR reduced fees for international ETFs WXHG & WXOZ by over 0.1%. Blackrock and SPDR both appear to be feeling fee pressure from Vanguard which has grown its footprint rapidly over the past 12 months.
  • After several years of underperforming the broader Australian market, UBS changed the reference index on two ETF from UBS research-based indices to Morningstar indices. Selective backtesting and the willingness to switch reference index were two of the key risks we recently highlighted in our article on smart beta ETFs.

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Global share ETF growth exploded in 2015

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Our update on the Australian ETF market as at January 2016.

Highlights

  • Global share ETFs attracted the lions’ share of new funds & growth – over $3 billion in 2015.
  • Vanguard and BetaShares closed the gap on market leaders SPDR and iShares – highlighting that consumers are most focused on ETF pricing and unique product innovation.
  • Generally ‘smart beta’ ETFs underperformed the broad market ETFs – including 6 that underperformed by more than 5% over the 12 months.
  • UBS and Market Vectors were the only issuers whose Australian ‘smart beta’ ETFs beat the general market. As a result, both were able to grow FUM strongly over the year.
  • Magellan attracted over $400m into Australia’s first active exchange traded managed fund (ETMF). K2 have followed the lead set by Magellan by launching their own ETMF.
  • Global equity ETFs achieved the best annual returns of all sectors and have performed strongly over 1, 3 and 5 years. 1 year fund flows exhibit a strong correlation with trailing 5 year returns.

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2015 : Stockspot end-of-year update

The Stockspot portfolios generated positive returns over the 12 months to December, and demonstrated lower risk than a broad portfolio of Australian shares over that time.

Most of the positive price performance came between January and April, before troubles in Greece and China dragged markets lower by 10% to 15%. It has been great to see many of our clients using the market dips this year as a good opportunity to top-up their portfolios and take advantage of lower prices. When markets return to their long-term uptrend, those who have been slowly adding to their investments will see the greatest impact.

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2015: Stockspot mid-year update

Welcome to our mid-year video update.

 
In this update:

  • Performance of the Stockspot portfolios for the 2015 financial year
  • Update on the response from our Australian ETF Report
  • Completion of our recent capital raising
  • News and events coming up in the second half of 2015

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Greece and China: 3 lessons for everyone

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The recent turmoil in global markets has been aggravated by 2 countries on opposite sides of the earth.

Greece, which makes up a minuscule portion of the global economy has destabilised world markets because of the flow-on effects that could result from an possible exit from the Eurozone. Meanwhile the Chinese share market which rose 150% in the 12 months to June, has now collapsed more than 35% from its peak, and with it brought wild gyrations in the markets of its regional partners, including Australia.

For an investor with a well-balanced portfolio, the impact of these crises has been more moderate. For example, the 3-5% falls our portfolios have experienced from their April peak are well within the normal range of moves that can be expected year-to-year since we have near zero direct exposure to Greek shares and only 1-3% in Chinese equities. Diversification across countries, currencies and assets has helped prevent much larger falls, while investments like our Global top 100 shares ETF (IOO) remain within 1% of their all-time highs.

Notwithstanding, once the dust settles there are some valuable lessons that can be learned from the situations in Greece and China, particularly on the dangers of debt and leverage.
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What does the falling interest rate mean for your portfolio?

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The RBA has moved to cut interest rates to the lowest level in over 50 years.

Interest rates play a large role in determining the performance of your investments. Here we look at how interest rates and expectations about future rates have impacted 5 different assets classes: Australian shares, Global shares, Emerging market shares, Australian bonds and Gold.

First, what has caused interest rates to fall?

In order to understand how different asset classes have been impacted by Australia’s low and falling interest rates, it is first important to explain how our terms of trade (the relative price of the things we export versus the price of things we import) have impacted interest rate expectations and the Australian dollar over the past year.

Over the last 2-3 years Australia’s terms of trade have fallen drastically as the price of our major exports like iron ore have collapsed. After reaching an all time high of 118.50 in 2011, Australia’s terms of trade have plunged into the low 80s and look likely to continue falling as commodities like iron ore, copper and oil fall to levels not seen since 2008 or earlier.

A fall in the terms of trade is sometimes referred to as an unfavourable movement in the terms of trade because it means that Australia must export more goods and services to maintain the same level of imports. This is bad news for the economy, reducing inflation and tax receipts for the government, putting pressure on the budget and jobs growth, and in turn forcing the Reserve Bank (RBA) into considering interest rate cuts to encourage spending and stimulate the economy.
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2014 : Stockspot end-of-year update

A short video update on how Stockspot portfolios have performed this year, along with some of our business highlights and what to expect in 2015.

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Chasing returns can harm your financial health

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The tendency for analysts and investors to chase return trends is a well-documented phenomenon.

Numerous studies have showed that flows into and out of funds and asset classes are related to recent returns. Because investment returns tend to revert to a long-term average over time, however, return-chasing is a dangerous game. The greatest inflow into a given fund or asset class typically occurs immediately after it has generated above-average performance and immediately before it starts to underperform.
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