SMSFs driving much of ETF's growth

ETFs, or Exchange Traded Funds (which are basically managed funds traded on the stock exchange, hence the name), continue to be enthusiastically embraced by investors. Furthermore, according to a recent report from Vanguard and Investment Trends, self-managed super funds are driving much of their burgeoning growth.

The Vanguard/Investment Trends April 2014 Self-Managed Super Fund Report has found a growth level of 41% over 12 months in the number of SMSFs investing through ETFs.

The report has also found SMSFs make up 45 per cent of the 120,000 Australian investors in ETFs, as at April this year. Just two years ago, Australia had 66,000 ETF investors in total.

According to Vanguard’s Robin Bowerman, the research suggests the growth in the popularity of ETFs among self-managed super funds is set to further accelerate. He added, “Two of the fundamental principles of sound investment practice - the benefits of diversifying a portfolio and keeping investment costs to a minimum - rank among the key reasons why many more SMSFs are turning to ETFs”.

Other significant findings of the report are that 58,000 SMSFs are intending to invest in ETFs for the first time over the 12 months from April 2014, while another 36,500 SMSFs plan to increase their existing ETF holdings over this time. Additionally, the number of intending first-time ETF investors is up by 76 per cent over the previous year.

One of Australia’s main ETF providers, BetaShares, said that during 2013, 11 new products were launched on the local exchange. The company believes that over the course of the next few years the ETF product range will continue evolving in the Australian market. From an investor numbers perspective, its research forecasts the total number of ETF investors to range from 126,000-174,500 by end 2015.

BetaShares’ managing director Alex Vynokur said, “The Australian ETF market continues to mature relative to its international counterparts, and we expect to see ETF usage among investors continue to grow, particularly within the SMSF space. Based on the historical growth rate, we predict assets under management to reach $15 billion by the end of 2015.”