"Exciting times ahead": Q&A with Dan Annan, BetaShares' new Director of Insto Business

The Australian ETF market is a great place to be working and I believe the potential for growth is significant.

The US ETF market is the global leader in terms of maturity, usage, and funds under management - with the US industry currently sitting at ~USD $3.5 trillion. Our local industry is clearly much smaller at just under A$40B, however, its growth has been rapid, recording approximately 40% growth over the last 3 years, for example.

"Where we are now in the Australian market, reminds me of the early growth years in the US"

As a participant in some of the fast growth of the US industry and a firsthand witness of how institutional investors, in particular, can drive industry growth, I am looking forward to working with the Australian institutional market to learn more about local challenges, and share best practice off-shore ideas to support local growth and adoption. In many ways, where we are now in the Australian market, reminds me of the early growth years in the US, which points to very exciting times ahead!

The key benefits of ETFs that drive institutional use are similar to those that appear to a retail investor: diversification, liquidity and cost-effectiveness. That said, the institutional investor has more tools in their tool-kit (i.e. the ability to use derivatives such as futures or swaps) than retail investors. Thus, for the institutional investor, the conversation is about the benefits of ETFs alongside their existing tool kit - and giving them a framework to evaluate ETFs to make an informed decision that will help to meet their investment objectives.

One of the key areas that we see institutional investors using ETFs is for Cash Equitisation. This application is, at a high level, where an institutional investor will place cash holdings into an ETF as a low-cost, interim solution before investing for the long term. BetaShares recently launched a key product that is suitable for this usage, an Australia 200 ETF (A200) - at 0.07% per year, it's the lowest cost Australian shares ETF in the world.

Another popular application is Tactical Allocation: an investor may want to place a tactical trade to express a view in a sector, country or an asset class. For example, an investor may want to express their view on the Australian resources sector, and can use an Australian resource sector ETF to easily and quickly do so.

Finally, Fixed Income: one of the fastest growing categories for Institutional investors in the ETF market globally and here in Australia, Fixed Income ETFs provide operational efficiency for institutional investors seeking transparency, instant access and liquidity - bringing the over-the-counter (OTC) market on screen to the exchange. Institutional investors have used Fixed Income ETFs as part of transitions, tactical allocation for yield enhancement and cash equitisation.

Yes. As the ETF market continues to grow, and investors gain comfort in the benefits, we will continue to see adoption from institutions. An interesting area of demand/interest from the market is exposure to the ESG (Environmental, Social and Governance) sector, and we anticipate ETFs playing a major role as a solution for institutional investors seeking such exposure.

"Soccer was a great "negotiating" tool for my parents to get me motivated on my responsibilities"

I think there's plenty of room for growth for product innovation, and institutional investors can certainly do more in partnership with ETF providers and Index providers in this regard.

One area where I think institutions can add value to support the ETF industry is in Fixed Income. Liquidity has been an area of challenge globally for Fixed Income since the GFC, and in mature markets such as the US and Canada, institutional uptake of Fixed Income ETFs has helped improve liquidity for the asset class.

Australian institutional investors will certainly help strengthen the fixed income ETF sector and we expect further growth and adoption in the local market.

I think as our market matures, we should see further innovation in Fixed Income and ethical exposures, Smart Beta strategies and out-come oriented ETF portfolios.

And a little about you, Dan...

I was born in West Africa Ghana and migrated to New York City with my family just before my teenage years. My childhood consisted of a lot of soccer - every week and every weekend there was practice or a game somewhere. It gave me the opportunity to travel around the US and see a lot of the country and some parts of Europe. Soccer was a great "negotiating" tool for my parents to get me motivated on my responsibilities (i.e. from homework to household chores), and as I look back today, I am thankful for having the sport as an important part of my childhood.

Having the passion for the sport at an early age shaped my focus and balanced approach to a lot of the things I do today.

My mum is the calm voice in my head and I would say my two year old daughter has become the most influential person in my life. I have found a whole perspective and focus to life since she came into our lives.

Always ask your partner "what can I do to help?"