State Street is tipping “at least three US$100 billion asset managers” to enter the fast-growing Australian exchange-traded fund (ETF) market this year.
In its 2025 global round-up on the sector, State Street says the US$150 billion plus Australian ETF will expand “across all investment sectors”.
“We also see active ETFs getting a second wind, with flows increasing as more global managers enter the market with their best strategies,” the report says. “This will not put a damper on passive ETFs, which will see the lion’s share of flows and continue to cannibalize the manager fund market.”
Australia is the fourth-largest ETF market in the Asia-Pacific region, logging almost US$152 billion under management across 375 products and 62 ‘sponsors’ as at the end of 2024.
Japan (US$537 billion) and China (US$506 billion) remain the big two in the regional ETF game followed by Taiwan (US$196 billion), the State Street study shows, with the ninth-ranked NZ market reporting about US$4.4 billion at the same date.
However, both NZ and the Philippines – the only two jurisdictions to feature just one ETF issuer – saw net outflows last year of -US$238 million and -US$15 million, respectively. The nascent Kazakhstan ETF sector also shrunk by US$1 million last year to leave US$11 million under management spread across 15 products and five managers.
Overall, the 16-country APAC region reported “explosive” ETF growth in 2024 of 47 per cent, State Street says.
“Even more astounding is the fact that 45 percent of that growth was from inflows and only 2 percent from market appreciation.”
China is on track to overtake Japan as the biggest ETF market in APAC by next year, the report says.
But ETFs everywhere are on the up, State Street says, as the tailwinds of demand, product creation and regulatory relief gather force.
The ETF global market pulled in almost US$2 trillion last year to finish the period on US$14.7 trillion with net inflow growth of between 20-30 per cent in all major regions.
For the year ahead, the State Street report authors – including global head of ETF solutions Frank Koudelka and head of insights, Anna Bernasek – expect to see even faster growth as the product-wrapper extends its hegemony over alternative asset classes, investor types and previously hold-out active fund managers.