The global exchange-traded fund (ETF) service provider’s 2025 Global ETF Outlook estimated Australia’s ETF industry will expand by 25 per cent from $240 billion to $300 billion in funds under management (FUM) in 2025 – underpinned by net inflows surpassing $50 billion.
State Street predicted that at least three global asset managers, with FUM of US$100 billion ($157 billion), will enter the local ETF market sometime this year. It also expects the cryptocurrency market will expand by at least one new coin.
New players that burst into the local market last year included Claremont, Investors Mutual Limited, Lazard Asset Management, and Monochrome, among others.
However, according to EY, the industry remains highly concentrated with the top three firms – Vanguard, Betashares and iShares – holding roughly 65 per cent market share as measured by FUM.
Overall, the wide adoption of ETFs across channels in Australia led to 26 per cent growth in 2024, State Street said, citing data which shows high-net-worth individuals are increasingly investing in ETFs via self-managed super funds (SMSF), with 43 per cent of SMSFs using ETFs.
Outside of the retail and SMSF markets, advisers, too, are planning to increase allocations to ETFs by more than 33 per cent during the next year, the ETF service provider said.
“The Australian ETF market continues to mature and investor adoption is higher, experiencing nearly 30 per cent CAGR over the last 10 years. Last year, the Australian ETF market enjoyed strong inflows, in particular, passive ETFs,” said Ahmed Ibrahim, State Street’s head of ETF solutions for APAC.
“There were also a number of new entrants into the active ETF space and that trend looks to continue in 2025, where large investment managers who have predominantly run unlisted strategies are adopting the dual access model or opening an ETF share class.”
Ibrahim expects the Australian ETF market to continue flourishing mainly driven by consumer demand for fixed income ETFs, product innovation, demand for digital assets ETFs and the continued reduction of management fees by ETF issuers.
“Of the 10.7 million investors in Australia, approximately 2 million now hold ETFs in their portfolio. ETF investors tend to be younger. However, we are also seeing more sophisticated investors and financial advisors also reap the benefits of ETFs. A growing proportion of high-net-worth individuals are allocating to ETFs via self-managed super funds,” he said.
Across the broader APAC region, State Street noted that ETF growth exploded by 47 per cent, with China and Taiwan topping the ladder with increases of 75 per cent and 54 per cent, respectively.
Overall, the expectation is that 2025 will be a defining moment in the industry’s evolution, with key developments expected to include the expansion of spot multi-coin ETFs beyond bitcoin and Ethereum.
