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Diversification fuels continued cash flow: ETF investors undeterred by market volatility

Vanguard | 01 November 2018


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The Australian ETF market attracted $1.8 billion in new cash flows in the third quarter of 2018, the highest quarterly cash flows for the year to date, according to Vanguard's September quarter ETF report.

Overall ETF industry AUM grew $3.4 billion over the quarter to just over $42 billion.

For the year to 30 September, international equity ETFs attracted just over $2.5 billion representing 58 per cent of total cash flows into Australian ETFs. US equities continued to deliver strong returns for investors with one year returns close to 28 per cent.

Damien Sherman, Vanguard's Head of ETF Capital Markets said "It's likely the combination of strong returns and a growing appreciation for the benefits of diversification are influencing this surge in international ETF investment."

"While US equities delivered strong returns for investors year to date, the more recent market volatility in October has again tested investors' resolve.

"However, as we have seen during most market pull backs, ETF investors continue to add to their positions during times of market volatility. Over the past few weeks we have received an increase in ETF creation activity.

"Times of increased market volatility can be a great opportunity for investors to review their portfolio and make the necessary adjustments to ensure that it is still in line with their long term asset allocations," Mr Sherman said.

Following a slower first half, the September quarter saw $337 million flow into Australian fixed income, representing 18 per cent of overall flow and $207 million more than was invested into Australian Equity ETFs. Global fixed income also increased in favour in the quarter, attracting 5 per cent of total cash flows - up from 4 per cent in the previous quarter.

Vanguard received 38 per cent of new cash flows in the quarter, with 33 per cent being allocated to Australian equity ETFs and 42 per cent into international equity ETFs. As at 30 September 2018, Vanguard ETFs totaled AUD$1.3 trillion globally, and, in Australia, Vanguard is the largest ETF manager with AUD$12.2 billion under management.

You can access Vanguard's Q3 2018 ETF Report here.