Aussie ETF industry to reach $150bn in 2023

Oksana Patron

21 December 2022

The next year will be a defining year for investments in exchange traded funds (ETFs) as investors will continue to turn to the cost-effective investment vehicle, with the Australian ETF sector forecast to reach $150 billion in asset under management (AUM) by the end of 2023, according to VanEck.

One in two investors would either increase their allocations to ETFs or make their first investment in ETFs in the next six months, according to the firm’s latest annual investor survey.

The 2022 VanEck Australian investor Survey, which confirmed that ETFs were by far the most popular investment vehicles, found that 70% of respondents were planning to invest in Australian shares in 2023, while almost 50% were planning to invest in international shares and only 13% said they did not plan on investing at all next year.

At the same time, less than 5% of investors selected unlisted/actively managed funds or LICs as their favourite.

As far as the self-managed super fund (SMSF) investors were concerned, one in two admitted having ETFs featuring in 92% of their SMSF portfolios, with almost 50% of investors planning on increasing their SMSF allocation to ETFs in 2023.

VanEck Asia Pacific chief executive and managing director, Arian Neiron, said that survey confirmed many investors would be seeking out buying opportunities next year as compelling valuations presented themselves.

“A slowing economy and falling inflation should see ‘quality’ companies with strong balance sheets, stable earnings and high return on equity come to the fore. These quality characteristics have outperformed before, and 2023 may be their time to shine again,” he said.

“2023’s bear market hasn’t deterred ETF investors. Australia’s ETF market is on track to become bigger than ever following a powerful rebound in October and a strong November.

“Flows into fixed income continued to gather momentum in Australia and internationally in November amid a shift from rocketing inflation to recession fears.  With yields likely to have peaked, 2023 could see fixed income providing a safe-haven for investors.”

According to VanEck’s estimates,  the global ETF industry would be expected to grow to over $20 trillion by 2026.