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Aussie ETF market experiences dip

The Australian exchange-traded funds (ETFs) market contracted in January after 20 consecutive months of growth in assets under management, according to BetaShares.

Released yesterday, the BetaShares ETF review for January reveals a drop in the growth of assets under management to $9.8 billion, which is wholly attributable to negative market movements, BetaShares managing director Alex Vynokur said, noting that despite the fall, the industry received positive new money inflows for the month of approximately $150 million.

“Despite the drop in overall funds under management this month, units on issue grew by 1.2 per cent, suggesting investor appetite remains buoyant despite recent volatility in the markets,” Mr Vynokur said.

“Products providing commodities exposure were the strongest performing products for the month as the domestic and international bourses across the world took a breather,” he said.

Instreet managing director George Lucas said the drop most likely reflects the quiet market in January, rather than a structural change.

“The first thing that comes to mind is obviously [that] the market came down three per cent and the market went down a little bit more overseas. That would have affected the size of the market, both the Australian and overseas-listed ETFs,” Mr Lucas said.

“The second thing is that January is a very quiet time, so there was very little inflow into anything during January in Australia. With the market going down, it didn’t match with the inflows coming in,” he said.

The BetaShares ETF review shows two thirds of the month’s inflows (approximately $100 million) were into Australian equity exposures, with a majority of the remaining money going into European equities exposure.

Instreet’s Mr Lucas said Australian ETFs definitely dominate.

“One of the reasons is a lot of the ETFs in Australia are unhedged from a currency point of view and so a lot of people that decide to go into overseas ETFs will not only think about their view of that equity market but their view of the Australian dollar against whatever country they are going in, and maybe they felt that the Australian dollar had bottomed a bit,” he said.

Mr Lucas is bullish on Japanese equities this year, but anticipates a five to 10 per cent drop in the yen against the Australian dollar.