Vanguard Australia narrows the ETF gap on iShares
Vanguard Australia is closing the gap in the battle for the title of Australia's largest ETF provider after pulling in close to $3 billion in net flows over the year.
Vanguard Australia is closing the gap in the battle for the title of Australia's largest ETF provider after pulling in close to $3 billion in net flows over the year.
Morningstar estimates* that Vanguard's Australian ETFs attracted $2.8 billion in the year to 31 March 2018, more than double the $1.3 billion gathered in the year to 31 March 2017.
3Q of 2017 was Vanguard's best. During that time it attracted $1.1 billion in new cash flows following the launch of a suite of multi-asset EFTs. Vanguard's four Diversified Index ETFs give investors access to diversification across and within all major asset classes in a single trade.
The record-breaking run has pushed Vanguard's ETF assets under management beyond $10 billion, closing the gap on rival iShares, which controls about $10.6 billion.
Commenting on the growth of Vanguard, Morningstar associate director manager research Alexander Prineas noted that in the early days of the Australian ETF market, iShares had a much broader range of global ETFs. However, products launched by other managers in recent years, including Vanguard, have narrowed iShare’s first-mover advantage.
International Equities recorded the largest broad group categories inflows for the year to 31 March 2018, followed by Australian Equities and Fixed Interest (Other).
Source: Morningstar Direct
The Australian ETF market continues to be dominated by four major players — iShares (29.38%), Vanguard Investment Australia (28.26%), State Street Global Advisors (15.13%) and BetaShares Capital (12.67%).
Further down the rankings, VanEck Investments Limited overtook Magellan Asset Management for the fifth spot after seeing yearly inflows of $837 million to Magellan’s $242 million.
Drilling down into individual funds, Vanguard Australian Shares ETF drew the highest estimated net flows for the year to 31 March 2018 at $673 million, according to Morningstar's estimated net flow, followed by iShares Core S&P/ASX 200 ETF ($656 million), and Vanguard MSCI Index Intl ETF ($464 million).
The Australian exchange-traded product market continued to innovate, and now counts 176 exchange-traded products. Prineas says the ETF market is broadening as active ETPs, strategic beta and other approaches gain investor attention, alongside traditional passive ETFs. Sustainability focused products have contributed to this trend, increasing in number and variety over the past five years as they capture investor attention.
Australian retail investors now have access to 10 ESG-focused (environmental, social and governance) ETPs from four providers: BetaShares, Russell Investments, UBS, and VanEck Vectors. All are equity products with exposure in Australia and offshore.
Across the sector, the Australian ETF market grew substantially over the year, up from $27.1 billion in March 2017 to $36.3 billion.
*All data is sourced from Morningstar Direct unless otherwise stated.
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Emma Rapaport is a reporter for Morningstar Australia.
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