After what seemed like a rush by everyone to get involved in 2015, with 35 new ETFs listed onto the ASX, things have ground to a halt in 2016, with no new ETF listings and ETFS Securities making the call to close down 10 of their commodity based ETFs.
The ETFs in question were their Agriculture, Commodities, Copper, Corn, Natural Gas, Grains, Industrialised Metals, Energy, Brent Crude and Wheat. None of which had much interest, with the 10 ETFs only totalling $1.5m market cap.
It’s no shock to see these close, with such small investments it was obviously not commercial to keep them open. It does show a change in tack for the industry, where once the focus was on new listings, now with the industry reaching some sort of maturity, funds are looking at how commercial their offerings are. There are around 20 ETFs listed with less than $5m market cap, we can only assume their managers are having a close look at the long term viability of these funds, and it is a timely lesson to investors to consider the market capitalisation of an ETF before investing.
We had a bold prediction of 200 ETFs on the ASX by the end of 2016. With 10 less funds now available then there were at the end of 2015 when we made that call, our prediction looks way off. Now the question is will there be more ETFs available at the end of 2016 than 2015? It is easy to think that at around 130, the size of the ETF market in Australia by count has peaked, however to compare a similar market to ours, Canada, with a similar population has around 350 ETFs listed on their share market. Their ETF market has had a few years head start on us, but it goes to show there's still more room for more funds in Australia, so long as they meet investors' needs.