Diversification and low cost driving ETF usage in Australia

May 18th, 2012 | By | Category: ETF and Index News

ETF use is on the rise in Australia, according to a survey of 6,785 investors and 966 advisers carried out by BetaShares, a leading Australian ETF provider

Diversification and low cost driving ETF usage in Australia

Drew Corbett, Head of Investment Strategy at BetaShares.

The survey showed that diversification and low cost were the main reasons driving investment in ETFs, though liquidity and access also polled well.

Drew Corbett, Head of Investment Strategy at BetaShares, said: “It’s not surprising investors are finding multiple reasons to use ETFs, ranging from accessing investments and liquidity as well as the core benefits of diversification and low cost.”

While the survey showed that the average ETF transaction size had increased 13% to AUD$18,000 from the prior year, it also revealed that many investors remain unacquainted with the product. Indeed, 21% of respondents cited lack of familiarity as the main barrier to investing in ETFs.

Corbett is confident that ETF providers will overcome this hurdle: “Many of the barriers stopping people from using ETFs are solvable through education by product issuers and advisers. Familiarity, transparency and knowing the underlying assets of the fund is about ETF providers engaging directly with investors to explain the structures of the product,”

The survey showed that financial advisers are continuing to adopt ETFs in their client’s portfolios with 31% of advisers now using and intending to continue using ETFs. Another 28% intend to use ETFs in the next 12 months or beyond as ETFs help reduce fees in portfolios, a key driver of dissatisfaction among clients.

“Growth in ETF use among advisers is encouraging and we expect this trend to continue as fee pressures mount. While there are still barriers for advisers, we are seeing these being broken down as ETFs become a mainstream investment vehicle,” noted Corbett.

Of the small group (27%) of advisers who encountered problems with ETFs, lack of third-party research (28%) and education (22%) were the most commonly cited issues.

The range of ETF products on offer in Australia has grown substantially, with new commodities, currency hedged, cash and fixed income ETFs all making their debut in recent months.

“While our market is less mature than the US, Europe and Canada, a majority of the major assets classes are now available on the ASX [Australian Securities Exchange]. We are beginning to see trading volumes return and an increase in market confidence should lead to strong growth,” added Corbett.

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