Adviser education helps huge ETF market growth

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The huge growth of exchange traded products to $10b in Australia this week is due to better adviser and investor education, an exchange traded funds expert says.

Since 2011 the ETP sector doubled and during 2013 it grew by $4b, which shows Australian investors are starting to embrace ETPs to improve their investment portfolio, State Street Global Advisers head of SPDR ETFs Amanda Skelly tells Wealth Professional.

But despite the recent growth, Australia falls behind the rest of the world in terms of ETP investment – for example Canada has $60b and Europe has $600b, Skelly says.

“Australia had been a little bit behind the curve and I bring that back to a couple of factors. One area of weakness is education.”

State Street has been trying to help advisers and investors understand what ETFs are and how they can use them in a portfolio, and Skelly believes it has paid off.

“Education is becoming less of a barrier to investment. I’m really pleased to see the growth really shoot up in 2013. The momentum is incredible.”

Another reason ETF sector is small compared to other markets is there are a fairly small range of local ETF products, with only 94 available.

Unlisted managed funds are the biggest part of the Australian market, and Skelly recommends combining these with ETFs for a diversified portfolio.

ETFs are cost effective, simple and transparent, she says.

“Financial advisers value talking through that with their clients. There are no hidden fees and all the holding are released every day on the web so if you have investors who are a bit nervous it’s good."

Skelly believes  2014 is going to be another strong year for ETPs, and predicts growth to $13b by the end of the year.

ASX said Australian broad-based ETPs experienced fund inflows of $96.03 million in 2013 and broad-based international ETPs had fund inflows of $80.8 million. 

The issuer with the largest fund under management was iShares with $3.61 billion, followed by State Street at $3.27 billion and then Vanguard at $1.4997 billion.
Exchange traded products include exchange traded funds (ETFs), exchange traded vehicles (ETVs), exchange traded notes (ETNs) and certificates. Generally, ETPs are benchmarked to stocks, commodities, indices, or they can be actively managed funds.


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