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ETF growth fuelled by advised investors

Advised SMSFs and retail investors have been central to the 44 per cent growth in the Australian ETF market between 2013 and 2015, according to Vanguard and Tria Investment Partners.

New research by the two, based on share registry data, has identified advised investors as the driving force behind the rapid growth in the Australian ETF market.

During the two-year period to 31 December 2015, 44 per cent of the growth in this market has been "largely driven by advised SMSFs and advised retail investors", according to the research.

Advised SMSFs more than tripled their ETF holdings to $2.6 billion over the two-year period, while advised retail investors almost doubled their holdings to $6.1 billion.

"Collectively, advised SMSFs and advised retail investors accounted for nearly half of the $18.2 billion in ETF funds under management by the end of 2015," the research said.

Tria Investment Partners partner Oliver Hesketh noted that institutional investors have also increased their use of ETFs in the 2013-2015 period, with their share of the market up 3 per cent to 16 per cent of ETF assets.

"Although advised investors drove the biggest growth in ETF FUM over two years, we have also seen the makeup of the market begin to shift, with institutional investors building their use of ETFs," Mr Hesketh said.


Breaking Australian investors' ETF holdings down into asset holdings, just under half of all ETF investment was in global equities by the end of 2015, the research found.

Unadvised retail investors were the most likely to prefer global equities, with overseas shares comprising 48 per cent of their ETF holdings.

Advised SMSFs were more biased towards the domestic market, with Australian share ETFs making up 51 per cent of their ETF holdings.

Vanguard Australia's head of ETF capital markets, Damien Sherman, said fixed-income ETFs will be the "next frontier" for investors.

"This asset class has only recently become available through ETFs to Australian investors, and it will no doubt form a key plank of many portfolios in coming years, particularly for those looking for reliable income but [who] are concerned about being overweight in Australian bonds," Mr Sherman said.