Australian ETF Industry Could Be Worth $50bn In A Decade
(SYDNEY) / SURRY HILLS) Australia’s $5 billion exchange-traded fund industry could be 10 times larger within a decade as a series of innovations make them more attractive to superannuation funds.
Horizons ETFs Management president Howard Atkinson said yesterday that the 10-year delay in introducing ETFs to Australia had held back the development of the market and that an explosive period of growth lay ahead. Speaking at the ASX ETF Institutional Conference in Melbourne, Mr Atkinson compared Australia with Canada and noted that despite the many similarities in the two economies, there was only $5bn in Australian-domiciled ETF assets, compared with $50bn in Canada.
“If you go back to 2003, the Canadian ETF industry had $5.5bn invested, which is roughly the same amount invested in Australia’s ETF industry today,” he said. “My point is that if you adjust for the timeline you end up with about the same assets. There is a huge growth profile ahead for this industry in this country.”
Exchange-traded funds are listed vehicles that are designed to track the price of an underlying index or commodity albeit more cheaply than a managed fund. Australia’s first ETF was based on the ASX 200 and introduced by State Street in 2001. State Street had launched its first ETF based on the S&P 500 in the US in 1993.
Mr Atkinson said that take-up of ETFs by the $1.3 trillion super industry would improve when innovations such as commission-free trades made their debut, attractive for investors making regular contributions to their retirement savings. Mr Atkinson said that actively managed ETFs would be a key driver of the next phase of growth, citing a McKinsey study that said they could attract as much as $US1 trillion in funds over the next decade.
ETF Securities will this week launch 10 ETFs based on hard and soft commodities, taking the total number of ETFs listed in Australia to 79.