Morningstar runs the numbers

We take a numerical look through this week's Morningstar research. Plus, our most popular articles and videos for the week ended 2 April.

Lex Hall

06 April 2021

We take a numerical look through this week's Morningstar research. Plus, our most popular articles and videos for the week ended 2 April.

Seven-fold

There is one area where the active fund management industry outside Australia is mounting a hugely successful defence against the rise of index trackers—ESG funds. “They are the undisputed success story of the last two years,” writes Edward Glyn, head of global markets at Calastone. “From a near standing start, they have captured investor imagination to such an extent that in 2019 and 2020 they took an astonishing $84 in every net $100 flowing over our network into equity funds of any kind. Net inflows rose seven-fold between 2019 and 2020, even though overall turnover in ESG funds only doubled. Three quarters of this new ESG capital ($16.3 billion) flowed into active funds.”

80 per cent

About 80 per cent of retirees are homeowners, says Deborah Ralston, Professorial Fellow at Monash University. “This is a high rate of homeownership by international standards that not only benefits individuals but the wider economy. Home ownership lowers age pensioners’ living expenses and means that the system is very cost effective for Australian taxpayers. At 2.4 per cent of GDP, Australia has one of the lowest cost public pensions systems in the OECD.”

$25 billion

If you had any doubt investors still regarded sustainable investing as expensive, impractical and unprofitable, Morningstar’s Grant Kennaway is ready to disavow you of that notion. The year 2020 was a banner year in which sustainable funds hit $25 billion. “Retail assets invested in Australasian sustainable investments grew 35 per cent to $25 billion compared with the previous year,” says Kennaway. “Given the volatility of global markets during the pandemic, it seems investors are increasingly committed to sustainable approaches, with over $4 billion of inflows over the past months.”

152 per cent

The amount by which the flagship ARK Innovation ETF (ARKK) rose last year, writes Morningstar’s Ali Masarwah. The ARK Genomic Revolution ETF (ARKG) rose as much as 180 per cent, and the ARK Next Generation Internet ETF (ARKW) gained nearly 160 per cent. “Investors are consequently snapping up these ETFs,” Masarwah writes. “The company's assets under management have swelled in recent months. ARK Invest's ETFs had assets of just US$3 billion at the beginning of 2020; by the end of 2020 fund assets topped US$34 billion thanks to immense inflows and strong performance. Today, total net assets stand at US$51 billion.”

85 per cent

The amount by which copper, a bellwether commodity, has increased since this time last year, writes Morningstar’s Lewis Jackson. Possible factors that could drive a new cycle include massive government spending, the “green energy” transition, and underinvestment in supply. And if the world’s internet search engine is any guide, “Commodity super cycle” hasn’t trended this high on Google since 2015. But Morningstar director of equity research Mathew Hodge is sceptical. “It isn’t like 2000,” Hodge says. “Iron ore was $20 then, it’s $160 now. Pre-2000s were some of the worst commodity prices since the Great Depression. Today, there isn’t cheap stuff lying around or a giant economy waiting to emerge.”