Aussie ETF industry contracts

Australian ETFs lost $2 billion in February as the industry contracted for the first time in more than a year amid fears of the spreading COVID-19 pandemic.

According to BetaShares, the 3.1% month on month decline in funds under management was due entirely to falls in asset values - with inflows into ETF products remaining positive at $1.6 billion.

Trading values reached an all-time monthly high, with just over $7 billion traded in Australian ETFs in February.

BetaShares chief executive Alex Vynokur said the $2 billion drop in FUM was expected.

"While many investors' portfolios clearly have suffered from recent falls in equity prices, it is notable that ETFs have performed as expected during a very challenging period," he said.

"At various times in the past, concerns have been raised that ETFs have not been tested in rapidly falling markets.

"In our view, the fact that ETFs have delivered liquidity and efficiency in this 'real life' test of extraordinary volatility puts those doubts to rest."

In the review, BetaShares found that global equities products received the largest inflows, raking in $935 million in February. Fixed income products also performed well, with $306 million in inflows.

In comparison, Australian and Asian equities ETFs were sold off, with investors chasing perceivably safer markets.

This rush saw short-focused equity funds and precious metals perform strongly during the month.

"The top performer for the month was Palladium, followed by BetaShares' Strong Bear Hedge Fund Products, BBUS (U.S. Equities) and BBOZ (Australian Equities), both of which produced gains of more than 20% as equity markets fell," BetaShares said.

For the three BetaShares "short" funds, trading volumes have increased by ten times or more from the daily average since February 24.

"With bearish market sentiment coming to the fore, many investors are looking to protect their portfolios, or to profit from market falls," Vynokur said.

"The increase in trading volumes in our suite of 'short' equity funds indicates that investors are finding these vehicles a liquid and convenient vehicle to express their bearish views."

Read more: ETFBetaSharesAlex VynokurcoronavirusPalladium
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