Vanguard records strongest ever year in ETF inflows despite extraordinary market volatility in 2020
MELBOURNE 15 January: Vanguard Australia has recorded A$5.7 billion in ETF inflows in 2020 (up 12 per cent from 2019), making it the best ever year on record according to the latest figures released by the Australian Securities Exchange (ASX) and Vanguard.
In addition to leading cash flows, Vanguard remains the largest issuer of ETFs by assets under management (AUM), accounting for 27.4 per cent (A$25.8 billion) of total market AUM as at 31 December 2020.
Vanguard’s flagship Australian Shares ETF, VAS, continued to see the largest inflows of any product in the market with a total of A$2.3 billion in 2020, and A$648 million in Q4 alone.
“These unprecedented flows show just how popular ETFs are becoming with both retail, advised and institutional investors alike,” said Minh Tieu, Head of Capital Markets for Asia-Pacific.
“More and more investors are valuing the inherent characteristics of ETFs that make them such an appealing investment option. The low barrier to entry from a cost and ease of use perspective, coupled with diversification, make ETFs an attractive choice for many Australian investors.
It is likely that confidence also continues to grow in the resiliency of ETFs. Even in the face of extreme market volatility, ETFs did not experience any trading or liquidity issues in 2020”.
The December quarter also saw Vanguard cap off a strong year with its best quarter on record, receiving A$2.1 billion in inflows, a 145 per cent increase from Q3.
Australian ETF Industry approaching A$100 billion
The Australian ETF industry again reached a new high, surpassing A$94.6 billion in AUM as at the end of 2020.
“Last year we saw a wave of new retail investors enter the market for the first time. Along with the cost benefits and flexibility, ETFs allow for greater value transparency, providing investors with real-time pricing via the exchange,” said Mr Tieu.
“We also continue to see greater participation year on year from institutional investors, with greater availability of ultra low cost ETFs likely bolstering demand”.
As with the previous quarter, international equity ETFs were favoured over domestic equity ETFs in Q4.
“The market exposure provided by international ETFs is a drawcard for many investors who are looking to diversify away from home-grown companies,” said Mr Tieu.
“With international shares, particularly those with exposure to the technology sector, outperforming in the second half of 2020, investors may be seizing the opportunity to capture higher returns. ETFs can be a low cost and efficient gateway to overseas markets where these shares may be more difficult and expensive to purchase individually”.
Domestic bond ETFs in Q4 however drew A$753 million in inflows, A$363 million more than international bond ETFs, suggesting greater investor confidence in local bond markets as economic and political upheaval continues overseas.
Diversified ETFs inflows also increased by A$242 milion in Q4 (Q3: A$148 million).
Looking ahead in 2021
As global economic recovery continues and the Australian ETF industry further matures, the momentum experienced in 2020 is unlikely to wane.
“With the prospect of a COVID-19 vaccine on the horizon bringing hope of global economic recovery, the ETF market may continue to see greater investor participation,” said Mr Tieu.
“Even if markets experience the same heightened volatiliy this year as they did last, investors know that ETFs can withstand the test. Broad based, low cost, diversified ETFs continue to be accessible, liquid and a worthy inclusion in any portfolio”.