The Australian exchange-traded fund industry continues to grow, with assets under management reaching a high of $5.7 billion at the end of September, according to BetaShares ETF Review.

The growth represented a 3.9-per-cent increase over the course of September, attributable rather to a rise in underlying asset prices rather than fund inflows.

The most popular products were currency-hedged and unhedged-gold products, both of which saw a surge in buying after the US announced its third round of quantitative easing in September.

Another popular ETF was the BetaShares US dollar ETF, which reflected investors’ views that the Australian dollar may be overvalued relative to the greenback.


Minimum-volatility products

At rival ETF provider BlackRock, head of institutional sales, Oliver Berry, says Australian superannuation funds have been strong buyers of offshore listed ETFs designed to deliver minimum volatility.

“We launched four products last year across emerging markets and US shares in minimum volatility, and you are seeing Australian institutions buying into these exposures,” said Berry in a telephone interview.

“Investors are still concerned with high volatility and how to manage that, and so they are attracted to strategies which incorporate these minimum-volatility products.”

The funds were attractive under a number of investment strategies, Berry said.

“Some investors are using them to reweight their portfolios in terms of risk, others are using them as transition assets while they move deeper into the areas covered by the ETF’s, while others are just using them as ways to gain exposure to a particular index,” he said.

“For many managers, ETFs are a diversification story, and in this market the minimum-volatility funds are attractive from a risk perspective.”

At BetaShares, head of investment strategy, Drew Corbett, said that local trading in ETFs was still subdued. He said trading values were up 5 per cent in September, but off a low base.


Lachlan Colquhoun is head of markets analysis at East & Partners.

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