ETF flows remain resilient

Mike Taylor

Managing Editor and Publisher

9 June 2026

The latest Exchange Traded Funds (ETF) flows data from Morningstar has painted an interesting picture of how Australian investors are handling the continuing market uncertainty, not least limiting their exposure to US equities.

The Morningstar analysis noted that despite market headwinds through the first quarter of 2026, diversified equities remained in demand, led by Australia large-blend with inflows of $2.8 billion and world large-blend with inflows of $2.3 billion.

It said flows had favoured non-US equities, Australian dollar-hedged global exposures amid a stronger Australian dollar and income-focused domestic strategies.

The analysis said the data indicate an appetite for diversification and yield.

It said that within fixed income, diversified credit remained the leading destination for new flows, maintaining its appeal. Investors also gravitated toward indexed exposure to Australian sovereign bonds and domestic investment-grade securities amid heightened volatility.

Morningstar said short-term fixed-interest and cash strategies also saw stronger demand, while appetite for global fixed income, largely US-focused, was subdued.

It said active ETFs continued to attract inflows in the first quarter of 2026, but with declines in fixed income alongside softer demand for active equities.

“Active bond ETFs gathered $480 million in flows, down around 65% from the fourth quarter of 2025, while active equity ETFs drew $781 million versus $1.3 billion in the previous quarter.

Morningstar said allocation strategies held steady, recording $422 million of inflows.

The overall asset composition remained broadly unchanged. Active equity ETFs continued to dominate, accounting for around 71% of total active ETF assets, reaching $76.4 billion as of March 2026.

It said active fixed-income ETFs represented $8.6 billion in assets, or 11.2% of the total, overtaking allocation ETFs, which stood at AUD 7.6 billion and 10.0% of the market.

Morningstar said flows into active ETFs continued to fluctuate in early 2026, declining relative to the broader trends observed through 2025. Active ETF inflows accounted for approximately 13.6% of total ETF flows in the first quarter, down from 2025, highlighting some moderation in demand.

“Since 2023, when several large investment trusts adopted ETF structures, the active segment has continued to grow in line with the overall ETF market,” it said.

The analysis said Dimensional Fund Advisors remained the leading active ETF provider with a 23.5% market share, followed by Betashares at 16.2%, and Vanguard and Magellan at 9.4% each.

It said while the composition of leading providers remains broadly unchanged, some reshuffling within the rankings has occurred. Competitive dynamics intensify, with the cumulative market share of the top 10 declining modestly from the previous quarter.