Australians favour international equity ETFs despite conflict

Australians continued to favour international equity ETFs in the first quarter of 2026, investing $6.9 billion in the category despite escalating tensions in the Middle East.

ASX-listed ETFs reached record flows of $15.2 billion in the first quarter of the year.

Vanguard Australia managing director Daniel Shrimski said Australian investors continue to use ETFs as a core portfolio strategy amid global uncertainty.

"This year has started strong for Australians investing in ETFs. In periods of market volatility, we see investors turn to ETFs due to benefits such as transparency and liquidity," Shrimski said.

While Australians preferred international equities the most, Australian equities followed with around $4 billion in inflows during the period.

"In particular, demand for equity ETFs has grown, with investors favouring broad, diversified core exposures," he said.

BlackRock recently said Australian ETF investors are preferring local equities over the US as global unrest rises due to the conflict in the Middle East.

BlackRock Australia iShares ETF and index investments specialist Tamara Haban-Beer Stats said investors are becoming more deliberate with their investments in the US.

Vanguard's most popular ETF Australian Shares Index ETF (VAS) reported around $880 million of inflows during the quarter. Vanguard MSCI Index International Shares ETF (VGS) remained Australia's second-largest ETF product, with over $537 million of inflows in March.

"We're also seeing continued confidence in Australian equities," Shrimski said.

"VAS remains a core holding for many investors, reflecting its role as a long-term, diversified exposure to the Australian share market."

Flows into Australian fixed income ETFs came in at $2 billion and commodity ETFs saw inflows of $785 million.

Vanguard expanded its Australian investment range in the quarter, launching four new products in global technology and international high yield in the form of three new ETFs and one unlisted managed fund.

State Street expects net ETF inflows to surpass $40 billion in 2026, bringing total assets under management close to $380 billion. It also expects both domestic and international fixed income strategies to increase market share.

"ETF flows clearly indicate that international equity ETFs are the most popular form of investment, giving Australian access to an international basket of securities in a single trade. At the same time fixed income ETFs are gaining increased traction and continue to grow as a percentage of the overall market," VanEck deputy head of investments and capital markets Jamie Hannah said.

"We expect 2026 to continue the upward trajectory of the Australian ETF market as pension fund assets, managed by local advisers continue to grow the pool of investable money."