ASX, the owner and operator of the Australian stock market, expects 100 exchange traded funds (ETFs) by June 2013.
“I’d be surprised if we weren’t at 100 by this time next year,” says Richard Murphy, general manager of capital markets at ASX. “There is not one big Australian fund manager not looking at ETFs.”
Still, Murphy says growth in Australia’s ETF market is predicated on global markets and the economy.
“The trend is for ETFs to grow but it is entirely driven by what happens to the global economy,” he says. “If main indexes were to flat line or drift downward, we would not see ETFs grow rapidly.”
Since June 2011 the number of ETFs and exchange-traded commodities has increased to 79 from 55. The market value of ETFs is now about $5.5 billion. The number of ETF issuers has grown from one in 2007 to nine.
Institutional and individual investors are attracted to ETFs because of their annual fees: between 9 and 90 basis points. An active asset manager may charge a yearly fee of at least 2.5 per cent. A basis point is one one-hundredth of a percentage point.
Mark Stanich of Australian Index Investments says investors can get a price of the company’s ETF units every 30 seconds.
That makes trading of the firm’s six ETFs that track the S&P/ASX Indexes easy, he says.
“We’re looking to grow and expand,” says Stanich.
Murphy says some asset managers are using ETFs as a proxy for active management.
“There is more and more concern over the cost of product,” he says. “People are looking for a more competitive offering from providers of product.”