Our update on the Australian ETF market as at June 2016.
- 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 $23,162M by the end of May 2016.
- Broad market and sector ETFs were the best performers both locally and internationally.
- Australian property ETFs continue to lead on 12 month performance due to falling interest rates.
- The BetaShares Cash ETF (AAA) saw a rare month of outflows due to a surprise cut in interest rates.
- MarketVectors rebranded to its parent company name – VanEck to become VanEck Vectors.
- BetaShares launched 2 ETFs in a partnership with major USA-based issuer WisdomTree.
The recent rebound in the share market has continued and May saw a further uptick in ETF investment, particularly for share market ETFs. A surprise interest rate cut led to a slowdown of funds moving into fixed income and cash ETFs. Australian and international shares gained on performance as well as new fund flows.
There were 2 new ETFs launched in April from iShares (IHWL and IWLD) which track hedged and unhedged versions of the iShares Core MSCI World All Cap ETF.
Five new ETFs were launched in May
They include from BetaShares’ new partnership with American ETF issuer WisdomTree. They give access to European (HEUR) and Japanese (HJPN) share markets and are currency hedged.
Vanguard launched another fixed interest ETF for Australia – VACF.
VanEck Vectors launched a dividend focused ETF (FDIV) and a global infrastructure ETF (IFRA) – the first in this category.
Several ETFs reduced their fees during the month
iShares Global 100 AUD Hedged ETF (IHOO) down 0.03% to 0.43%
iShares S&P 500 AUD Hedged ETF (IHVV) down 0.03% to 0.10%
Vanguard All-World ex-U.S. Shares Index ETF (VEU) down 0.01% to 0.13%. This also went down 0.01% the previous month.
ETF fees are now highly competitive between US share ETFs, ranging from 0.05% to 0.10% p.a.:
SPDR S&P 500 ETF Trust (SPY) at 0.09%
iShares S&P 500 ETF (IVV) at 0.07%
iShares S&P 500 ETF hedged (IHVV) at 0.10%
Vanguard US Total Market Shares Index (VTS) at 0.05%
|Sector||Total FUM May 2016 ($M)||Monthly change in FUM ($M)||Monthly change in FUM (%)|
|Global Shares (broad market)||8,595||526||+7%|
|Australian Shares (broad market)||6,665||473||+8%|
|Fixed Income & Cash||2,258||54||+2%|
|Australian Shares (strategies)||2,177||45||+2%|
|Australian Shares (sectors)||1,593||169||+12%|
|Global Shares (sectors)||741||55||+8%|
The total ETF FUM continued its upward trajectory this month, cracking $23 billion for the first time.
The ETF issuers almost all showed increases in FUM as fund inflows returned and share market returns were strongly positive.
There was large dollar growth by Vanguard and BetaShares which both extended their lead over SPDR, whilst other large issuers had more gradual inflows of funds. Small issuers, such as Magellan, VanEck Vectors and ANZ grew at double-digit rates in the past month. K2’s two managed funds remained stagnant.
Apr 2016 ($M)
May 2016 ($M)
|Monthly change in FUM|
(ex market moves)
in May 2016 ($M)
|Average Monthly Return
in May 2016 ($M)
Best and worst performers
The ETFs with the best and worst one year returns show a clear division across sectors.
Australian property’s resilience in a time of share market uncertainty is clearly illustrated with 3 of the top 5 performers over 12 months. The iShares S&P Global Consumer Staples ETF has also continued to deliver as another defensive ETF and the strength of the technology sector in the USA is evidenced by the strong showing from the BetaShares NASDAQ 100 ETF.
BetaShares Crude Oil Index ETF-Currency Hedged (Synthetic) ETF has also retained its place as the worst performer however this is likely to change over the next few months due to the timing of oil’s fall during mid-2015.
The slowing economic conditions in China are evidenced by the negative returns of the China ETF (IZZ) and Palladium (ETPMPD), as Palladium is mostly used for industrial and commercial purposes.
|ASX code||ETF name||Total FUM
May 2016 ($M)
|1-year total return|
|SLF||SPDR S&P/ASX 200 Listed Property Fund||652||16%|
|VAP||Vanguard Australian Property Securities Index ETF||672||15%|
|MVA||VanEck Vectors Australian Property ETF||56||15%|
|IXI||iShares S&P Global Consumer Staples ETF||157||13%|
|NDQ||BetaShares NASDAQ 100 ETF||58||10%|
|OOO||BetaShares Crude Oil Index ETF-Currency Hedged (Synthetic)||54||-44%|
|IZZ||iShares FTSE China Large-Cap ETF||71||-31%|
|ETPMPD||ETFS Physical Palladium||1||-23%|
|IBK||iShares MSCI BRIC ETF||29||-20%|
|QCB||BetaShares Commodities Basket ETF-Currency Hedged (Synthetic)||8||-19%|
Increases and decreases in FUM
Investors poured funds into Australian share ETFs in May, which took the top 5 places by fund inflows. The ASX 200 was again very popular, with IVV and STW tracking this index and VAS tracking the slightly broader ASX 300.
The growth in share ETFs was also shown through the high inflows into gloabl ETFs. New inflows now seem to be split between the iShares, Vanguard and SPDR funds.
May had relatively low outflows overall due to the market’s resurgence. The outflows from the AAA cash ETF show that the uncertainty in the share market has slightly declined after a period of greater stability and is likely a response to the RBA’s interest rate cut in early May.
Stockspot model portfolios contain VAS and Stockspot Themes include the options of IVV and VHY.
|ASX code||ETF name||Monthly change in FUM ($M)||1-year total return|
|Increases in FUM|
|IOZ||iShares Core S&P/ASX 200 ETF||159||-4.2%|
|VAS||Vanguard Australian Shares Index ETF||129||-2.3%|
|STW||SPDR S&P/ASX 200 ETF||119||-2.8%|
|IVV||iShares S&P 500 ETF||116||6.7%|
|VGS||Vanguard MSCI Index International Shares ETF||96||1.4%|
|Decreases in FUM|
|AAA||Betashares Australian High Interest Cash ETF||-25||2.5%|
|VHY||Vanguard Australian Shares High Yield ETF||-10||-10.1%|
|IBK||iShares MSCI BRIC ETF||-6||-17.7%|
|EPTMAG||ETFS Physical Silver||-2||1.2%|
|MVE||VanEck Vectors Australian Emerging Resources ETF||-1||-9.7%|
S&P/ASX200: An index of Australia’s largest 200 companies by market capitalisation.
Bear hedge fund: A hedge fund designed to provide higher returns as the market falls, it may track the inverse of an index as an ETF.
Exchange trade fund (ETF): An open-ended investment fund that is traded on a stock-exchange. ETFs provide direct exposure to a wide range of investments in their asset class such as Australian shares, international shares, bonds or metals.
Broad market ETFs: Track the widest range of securities in the market that has been selected.
Sector ETFs: Track sectors within a market. (e.g. property, financials or resources)
Strategy ETFs: Only include some securities in the market. Securities are selected according to certain rule-based factors (e.g. dividend yield or research rating)
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Main image: Johan Blomström via Flickr
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