Australian exchange-traded fund (ETF) specialist, BetaShares, is targeting the release of some unlisted portfolio investment entity (PIE) versions to the NZ market some time this year.
Thom Bentley, BetaShares NZ director adviser and institutional, said the firm intends to roll out a handful of products on this side of the Tasman in 2022 once regulatory approvals are in place.
Many Australian investment managers (including BetaShares) have released products as-is in NZ under the trans-Tasman mutual recognition regime or partnered with local fund-hosts to create PIEs.
However, BetaShares has begun the process of applying for a managed investment scheme (MIS) licence, Bentley said, as the first step in building its own NZ-friendly products.
“There’s lots of interest in BetaShares funds here but the feedback is investors want them structured for the NZ market as PIEs,” he said.
While the MIS licence approval could take a few months, Bentley said BetaShares would only launch a select few of its 60-plus funds in PIE format.
“We’re seeing demand in NZ for our ESG funds, for example, as well as the ASX 200 and global quality ETFs,” he said.
Overall, BetaShares manages about A$22 billion in an Australian ETF market that grew almost 50 per cent in 2021 to hit more than A$136 billion following two years of similar annual growth-rates.
In a review of the Australian ETF landscape in 2021 published last week, BetaShares chief commercial officer, Ilan Israelstam, says the market grew a record A$42 billion last year (beating the A$33 billion previous high score set in 2020) on net inflows of A$23.2 billion topped up with strong investment performance.
“The growth in flows is mirrored by the rapid rise in the number of Australian ETF investors, with our recently released BetaShares/Investment Trends ETF Report noting that there are now 1.7 million Australians investing in ETFs, representing investor growth of 33% v. the year before,” Israelstam says.
ETF trading volumes dipped slightly last year (a figure distorted by the huge spike in investor activity during the first COVID shock in 2020) as a handful of the 35 or so providers dominated proceedings.
“Flows by ETF manager continued to be concentrated, and significantly more so than last year, with the top 3 players (Vanguard, BetaShares and iShares) receiving 75% of the industry’s flow combined (compared to 70% for the top 3 players in 2020),” the report says.
Total ETF products listed on the ASX reached 280 last year with 33 new launches – mostly listed versions of active manager funds – trimmed by nine closures during the 12-month period.
And despite the flurry of active ETF creation, benchmark-based products – heavily weighted to ‘vanilla’ index funds – took the lions’ share of flows.
“By inflows, passive products captured the vast majority of flows with 92% share. Notably, and notwithstanding the large number of Active ETF product launches, we actually saw a larger than ever proportion of the flows into passive ETFs, with the Active ETF sector dropping its share of flows from 10% in 2020 to 8% in 2021,” the BetaShares report says. “This illustrates that notwithstanding the high levels of product launch activity, there is still some way to go to for mainstream adoption of Active ETFs in the industry, and a continued (and rising) preference by ETF investors for passive products.”
Nonetheless, at A$14 billion plus under management the active-style Magellan Global Fund still ranks as the single-largest ETF listed on the ASX – albeit that the same product suffered net outflows of almost A$1.4 billion last year.
“For the first time since compiling this report, every one of the top 10 funds for flows was an equities exposure ETHI fund taking in ~$800m of net new money over the year,” Israelstam says. “Notably, in terms of fund outflows, 3 of the top 10 funds for outflows were managed by Magellan, whose investment style fell significantly out of favour in 2021. For the second time in a row an ESG/ethical fund made its way into the top 10 for flows, with our ETHI fund taking in ~$800m of net new money over the year.
“Notably, in terms of fund outflows, 3 of the top 10 funds for outflows were managed by Magellan, whose investment style fell significantly out of favour in 2021.”
He says BetaShares expects the Australian ETF market to finish 2020 with up to A$190 billion in assets under management.