The rapid growth in the Australian exchange traded product industry in 2020 was so large it caught the eye of global research house Cerulli in its February Asian Monthly Trend report.
The industry grew by more than 30% year-on-year in 2020 to $79.3 billion in assets under management. Net new inflows for the year were $18.7 billion.
“The investment management industry underwent many challenges in 2020. However, it was a remarkable year for Australia’s exchange-traded product sector, which has emerged resilient and recorded no issues with liquidity or redemptions,” Cerulli managing director Australia, Ken Yap, said.
“While there are signs that the market has matured, there is still room for innovation and some product gaps to be filled.”
Cerulli suggested that the strong growth came off the back of an increase in new investors during COVID-19 market volatility, and that many of those investors opted for ETFs.
"Providers in Australia saw that a higher proportion than ever of new inflows came from direct individual investors, often young and entering the share market for the first time," the report said.
The majority of new inflows - 83 per cent - went to index products, 10 per cent was invested in active and 7 per cent in smart beta.
Cerulli also points out that there was a reduction in the net number of ETPs in Australia for the first time - from 258 to 256.
"There was a sense of some satisfaction in the industry that the ETF sector had come through a di cult time unscathed. Some in the investment management industry had argued that the exchange-traded sector had never been tested by true stress; well, it has now, and no problems were reported with liquidity or redemptions," the report said.