ETFs offer solutions during uncertain times

Thursday 30th July 2020 Penny Pryor

Markets might be volatile and the outlook uncertain but the exchange traded fund (ETF) industry is doing well as investors look for simple and easy to understand investor solutions.

The Australian Stock Exchange reported a 29.7 per cent increase in funds under management in exchange traded products last financial year to $65.64 billion. And in the month of June, funds under management increased 3.4 per cent from May’s $63.46 billion.

“While the last few months have been very challenging for investors, the ETF industry as a whole is emerging in a strong position, and our business in particular has done well,” Ilan Israelstam, head of strategy and marketing at BetaShares, said.

“In June, we managed to break the record for the highest level of monthly flows recorded by an individual issuer, with over $700 million of inflows received.”

Helping with hedges

BetaShares has recently offered hedged versions of some of its larger global ETFs to help investors manage volatility.

“Currency movements are notoriously difficult to predict, and recent exchange rate volatility illustrates the impact that currency exposure can have on investment returns,” Israelstam said.

“The decision to broaden our range of currency-hedged ETFs came in response to significant client demand, as many investors are looking to substantially remove the currency variable from the investment equation.”

ESG triumphs

State Street Global Advisors has launched a new ETF in response to client demand in the environmental, social and governance (ESG) space.

“Critics always said a knock to markets would temper demand for ethical investments but in recent months, the reverse is true,” Meaghan Victor, head of SPDR ETF Asia Pacific distribution said.

“More investors are looking at ways to align their values with their investments and in many ways, recent events have heightened demand for sustainable investing. “

One of the ETFs that BetaShares is now offering a hedged version of - the BetaShares Global Sustainability Leaders ETF - is also a sustainable product and has had some of the group’s strongest inflows.

“We believe that one of the primary reasons that investors (both institutional and individual) have favoured our ethical funds is the integrity and quality of the investment methodology our funds employ,” Israelstam says.

Of course there have been some changes as a result of the pandemic.

“We won’t be ringing the bell in person at the ASX on Wednesday when E200 lists on the stock exchange,” Victor says.

“And in addition, our adviser and investor education pieces about the new fund are all taking place virtually.”

Both organisations say they will continue to focus on client demands and launch new ETFs as the demand arises.

Read the full Q&A with State Street's Meaghan Victor here.

Back to Insights