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ETFs had best year in 2021: Vanguard

The Australian ETF industry saw its best year on record in 2021 with $25.9 billion in cash flows and $134 billion in assets under management.

Vanguard data revealed that investor flows into ETFs increased by 28% in 2021 in the face of ongoing COVID-related uncertainty.

Vanguard Australia attracted about 35% or $8.7 billion of total flows, making it Vanguard's best year on record also.

Fast forward to 2022, and ETF popularity is expected to rise still.

Minh Tieu, head of Vanguard Australia's Investment Strategy Group and ETF Capital Markets, Asia Pacific said that the growth of the Australian ETF industry has in part been accelerated by the growing number of new retail investors throughout the pandemic.

"We believe this is because Australians seek ways to build sustainable income or new avenues to channel discretionary pay," Tieu explained.

"While demand for ETFs from advisers and institutional investors remains strong, it's the surge in retail flows that has been especially noteworthy.

"It's encouraging to see ETFs really enter the mainstream as more and more personal investors appreciate their inherent benefits - namely that ETFs are low-cost, diversified, and easily accessible."

Globally, the US ETF industry has on average grown 23.9% in AUM every year in the last five years.

ETF cash flow in the US in 2021 was US$911 billion, of which Vanguard US attracted US$328 billion.

Meanwhile, the Australian ETF industry has on average grown 39.5% in AUM every year over the same period.

"If we compare the US and Australian ETF market, the trajectory of growth is similar," Tieu said.

"While the US market is bigger and at a different stage of adoption, Australia is certainly catching up.

"It's a strong indicator that ETFs are not just an investment fad, but rather a proven long-term investment strategy worldwide".

Read more: Vanguard AustraliaMinh Tieu