Assuming markets remain positive in the wake of Donald Trump’s ascension to the White House, Beta Shares believes Australians could end 2025 holding in excess of $300 billion in exchange-traded funds (ETFs).
While Beta Shares has always been bullish on the market outlook for ETFs, the Australian fund manager admits to seriously underestimating the scale of net flows by some margin, with previous forecast barely exceeding $200 billion in funds under management (FUM).
However, given that ETFs still only account for approximately 4% of the managed funds industry in Australia - a figure that is low compared to many other international markets - Betashares chief executive Alex Vynokur expect investor adoption of ETFs to accelerate further.
The global pandemic brought with it a silver lining for ETFs with FUM increasing from $40bn to $130bn between July 2019 to July 2021. Best estimates suggest the top four ETF issuers including Vanguard, Betashares, iShares and VanEck account for 96.4% of net fund flow.
Offshore and low-cost
Overall, Australian investors tipped a record $33.5 billion into ETFs in 2024, $17 billion of which made its way into international equity ETFs. For example, Vanguard’s MSCI Index International Shares ETF (VGS) alone attracted close to $2 billion in investor cash flows last year.
However, investors also saw the benefit in having home-market exposure with Australian equity ETFs attracting robust investor inflows of around $7.8 billion over 2024.
Despite the proliferation of new active ETF products, low-cost index products, which hold over 80% of the Australian industry’s assets, captured most investor inflow.
Vanguard remained Australia’s largest ETFs assets manager, attracting a record $9.5 billion of cash inflows during 2024. The issuer’s Index Vanguard Australian Shares ETF (ASX: VAS) - which invests in the top 300 companies on the ASX - also remained Australia’s largest ETF with its assets under management (AUM) increasing by more than $3 billion last year to $17.8 billion.
The next most popular ETF issuer was the iShares S&P 500, which had $11.03 billion in AUM, and the Vanguard MSCI Index International Shares, which had a market cap of $10.37bn, according to Betashares data.
Based on VanEck’s analysis, Global X 21Shares Bitcoin ETF was the best performing product in 2024 with returns of 146%, which tracked similar returns to bitcoin during the year.
Corporate Bonds
Meanwhile, January is also shaping up to be a busy month for new corporate bond issuance which currently include:
- Westpac raised $2.5 billion in a senior unsecured five-year deal. The floating rate tranche raised $2.15 billion and was priced at 3-month BBSW + 84bps. The $350 million fixed rate tranche was issued with a 4.95% coupon.
- Toyota launched a five-year senior unsecured fixed and or floating rate bond with indicative pricing of 115bps over swap.
- Vicinity launched a seven-year senior unsecured fixed rate bond with indicative pricing of 140bps over semi-quarterly swap.
- ANZ raised $1.75bn in a 10NC5 (10 year, non-call five) transaction, including a $1.25bn floating rate tranche with a coupon of 3-month BBSW + 152bps and a $500m fixed to floating rate tranche with a 5.545% coupon.
- French bank, Credit Agricole, raised $600 million in a 10-year, non-call five-year transaction. There were two tranches, a fixed to floating, worth $250 million at a 6.06% yield, and a $350 million floating rate tranche with a coupon of 3-month BBSW + 205bps.