One of the unique attributes of ETFs is their ability to create new units. We rank the top 20 ETFs by net inflows for the 2016 Financial Year and have a look at the insights they provide.
One of the unique attributes of Exchange Traded Funds (ETFs) and one which they share with managed funds, is their ability to create new units. This means that theoretically there is no limit to the size that an ETF can get to. We thought it would be interesting to have a look at which ETFs had the highest net inflows last financial year to see where investors have been placing their money.
The table below shows the top 20 ETFs by net inflows for the 2016 Financial Year. Note that this is separate to fund performance, we looked at performance in a previous post, rather is unit growth, either by investors adding more money or reinvesting dividends.
|Ticker||Name||Net Inflows||Market Cap|
|VAS||Vanguard Australian Shares Index||$499 M||$1,635 M|
|MGE||Magellan Global Equities Fund||$371 M||$545 M|
|VGS||Vanguard MSCI Index International Series||$231 M||$294 M|
|VAF||Vanguard Australian Fixed Interest Index||$208 M||$423 M|
|AAA||Betashares Australian High Interest Cash ETF||$200 M||$891 M|
|VAP||Vanguard Australian Property Securities Index ETF||$197 M||$735 M|
|STW||SPDR S&P/ASX 200 Fund||$189 M||$2,974 M|
|VEU||Vanguard All-World EX US Shares Index||$166 M*||$645 M|
|VHY||Vanguard Australian Shares High Yield ETF||$164 M||$655 M|
|IEU||iShares Europe ETF||$123 M*||$3,533 M|
|IAF||iShares UBS Composite Bond ETF||$120 M||$318 M|
|HVST||BetaShares Australian Dividend Harvester Fund (Managed Fund)||$111 M||$216 M|
|VTS||Vanguard US Total Market Shares Index||$111 M*||$857 M|
|IOZ||iShares S&P/ASX 200 ETF||$106 M||$453 M|
|IXJ||iShares Global Healthcare ETF||$103 M*||$2,104 M|
|BBOZ||BetaShares Australian Equities Strong Bear (Hedge Fund)||$98 M||$90 M|
|USD||BetaShares U.S. Dollar ETF||$91 M||$532 M|
|MVW||VanEck Vectors Australian Equal Weight ETF||$85 M||$137 M|
|VGAD||Vanguard MSCI Index International Series (Hedged)||$73 M||$101 M|
|GOLD||ETFS Physical Gold||$63 M||$676 M|
*These are cross listed ETFs where the unit growth and market capitalisation represents the global growth and market cap, not just that attributed to the Australian listed units.
Unsurprisingly, ETF investors are favouring low cost options. Four of the funds that make up our lowest cost ETF portfolio (VAS, VGS, VAF, AAA) make up 4 of the top 5 funds by flow. Vanguard, traditionally providing some of the lowest cost options make up 8 of the top 20 funds by flow.
We had a look at Actively Managed ETFs a couple of months ago and reported on the success of Magellan’s launch into this space. With the Magellan Global Equities Fund only going live in March 2015, it now has an impressive market cap of over $500m and had the second highest inflow in FY 2016, likely explaining why Magellan have recently launched another ETF product on the ASX.
Two of the top 20 funds are specific high yield funds. Vanguard’s Australian Shares High Yield ETF focuses on companies with higher forecasted dividends, whereas Betashares Australian Dividend Harvester Fund specifically employs tactics to suck the dividends out of the market. With a dividend yield of 11.5% over the last 12 months it’s doing its job.
Whilst we didn’t show the monthly flows in this post, deeper analysis shows momentum is a key driver in ETF unit growth. The first half of the Financial Year saw net outflows into Gold ETFs, whereas the second half, where Gold really began to rally, saw significant inflows into Gold. The Betashares negative index funds (BEAR and BBOZ) saw significant inflows in the months where markets tumbled, and USD saw inflows in months where the USD rallied or the AUD fell.
5 of the 20 ETFs specifically focus on the Australian Equity market, showing Australian investors still have a strong home bias, however outside of these there is a mix of cash, fixed interest, property, global equities and commodities, which indicates more investors are using ETFs to build a diversified portfolio.
We hope this post provided some nice insights on investor behaviour in the ETF space. We’ll periodically re-visit this list to see if the same names continue to appear or if some of the newer entrants begin to move to the top of the list.