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Investors rush back to equities in Q4 as ETF market breaks records in 2019

Vanguard | 15 January 2020


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The Australian ETF market surpassed AUD $61b in assets under management (AUM) with record inflows for 2019 reaching over $13.7b according to the latest figures released by the Australian Stock Exchange (ASX) and Vanguard.

ETF industry inflows for 2019 far outpaced the $8.0b and $6.4b received in 2017 and 2018 respectively, with ETF assets growing at a compound annual growth rate of over 23 per cent for the past five years.

When commenting on the increasing popularity of ETFs, Minh Tieu, Vanguard’s recently appointed Head of ETF Capital Markets for Asia Pacific, attributed it to more investors than ever before embracing the benefits.

“Investors faced challenging market conditions in 2019, with the simmering US and China trade war, Brexit, the Australian federal election, all the while trying to digest the findings of the Royal Commission, said Mr Tieu.

Despite these geopolitical conditions, more investors continued to embrace the benefits of ETFs, spurring growth in the market and increased competition among issuers that have in turn driven down the cost to invest, allowing investors to keep more of the returns they earn.”

Global equities was the favoured asset class of Q4, with investors allocating $1.4b which saw an increase of 85 per cent from Q3 ($809m). Australian equities attracted over $1.2b of inflows in the final quarter of 2019, more than the combined $912m received in the first six months of the year, reflecting growing investor confidence in the local market according to Mr Tieu.

“Following a slow start to the year, cash flows into Australian equity ETFs returned to more normal levels during the December quarter, potentially reflecting the outcome of investors putting to bed their fears from the market volatility experienced earlier in the year.”

Despite the Reserve Bank of Australia making three interest rate cuts across five months, bringing the cash rate to its lowest ever levels, fixed income continued to attract significant investor interest throughout the year. Investors placed $2.9b into Australian fixed income and $968m into global fixed income products for the year, over a quarter (27 per cent) of total cash flow for 2019. 

“While fixed income products do not generally deliver high returns when compared with other investment products, they can play a crucial role in most investors' portfolios by providing diversification, and income and downside protection,” said Mr Tieu when discussing the steady inflows.

“We are pleased to see that even with record low interest rates, investors continued to invest funds into fixed income products across the year and understand the important role fixed income plays in a diverse portfolio.”

Last year was also a year of record growth for Vanguard ETFs, with Vanguard ETF AUM growing to $19.5b and inflows surpassing $5.1b, making 2019 Vanguard’s strongest year since the launch of their first ETFs 10 years ago.

In 2019 Vanguard launched the Vanguard Global multi-factor active ETF, adding to its growing range of factor products and bringing the total number of ETFs to 29, all of which finished the year with positive returns.

“ETFs are a vehicle that investors can use to build diverse portfolios across multiple asset classes. Vanguard’s ethos is built around providing a range of products that help investors diversify their portfolios at a low cost, and we encourage a long-term strategy to enable investors to achieve their financial success,” said Mr Tieu.

As at 31 November 2019, Vanguard ETFs totalled AUD$1.7 trillion globally, and, in Australia, Vanguard continues to be the largest ETF manager.


2019 Australian industry listed ETF market net cash flow by asset class


Asset class
Cash Flow
($m)
Cash Flow
(% of total market)
Australian equity $2,150 16%
Global equity $1,930 14%
Global infrastructure $478 3%
Australian fixed income $2,918 21%
Global fixed income $969 7%
Cash $890 6%
Australian property $640 5%
Global property $73 1%
Commodity $533 4%
Currency -$100 -1%
Multi asset $491 4%

2019 Australian industry listed ETF market cash flow by issuer (Top 5)


Issuer
Cash Flow ($m) Cash Flow
(% of total market)
Vanguard $5,108 37%
BetaShares $2,870 21%
iShares $2,574 19%
VanEck $1,331 10%
Magellan $551.4 4%

2019 Australian industry listed ETF market cash flow by product (Top 5)


Product
ASX Code Cash Flow ($m)
Vanguard Australian shares index ETF VAS $939
iShares Core S&P/ASX 200 ETF IOZ $732
Vanguard MSCI index international shares ETF VGS $591
Vanguard Australian fixed interest Index ETF VAF $536
BetaShares Australian high interest cash ETF AAA $502

About Minh Tieu

Minh Tieu is Head of ETF Capital Markets Asia-Pacific, within Vanguard’s Investment Management Group.

In this role Minh is responsible for the primary and secondary markets of the ETF product suite in
the Asia-Pacific region.

Prior to commencing this role in January 2020, Minh led capital markets in Hong Kong where he helped drive the growth of Vanguard’s ETF presence across Asia.

Minh joined Vanguard in 2008 holding roles in portfolio management and trade execution of indexed international portfolios, before relocating to the business’ Hong Kong office.

Minh holds a Bachelor of Business (Economics & Finance) from RMIT and a Master of Applied Finance from Macquarie University.

About Vanguard

With more than AUD 8.8 trillion in assets under management as of 30 November 2019, including more than AUD $1.7 trillion in ETFs, Vanguard is one of the world’s largest global investment management companies. In Australia, Vanguard has been serving financial advisers, retail clients and institutional investors for more than 20 years.

For further information please contact:
Francesca Marinucci
Senior Public Relations Specialist
francesca.marinucci@vanguard.com.au
+61 413 559 766