Smart beta ETF inflows on track to hit $10bn

Australian-traded smart beta ETFs have continued to scale rapidly, with funds under management rising from $20.7 billion at the end of 2023 to $30.8 billion at the end of 2024, before reaching $41.6 billion by March 2026, according to Betashares.

Betashares investment strategist Tom Wickenden told Financial Standard the increases have been driven by accelerating investor demand.

Net inflows totalled approximately $6.7 billion in 2023, increased to $7.1 billion in 2024, and then rose further to a record $8.8 billion in 2025

Betashares said momentum has remained strong into 2026 with Australian-traded smart beta ETFs seeing roughly $2.2 billion in net inflows in the first quarter. FUM remained above $41 billion.

"Smart beta ETFs are increasingly drawing capital that may previously have been directed to traditional active managers, as investors and advisers seek more reliable outcomes on fees, return consistency and long-term results," Wickenden said.

"Rather than depending on discretionary stock picking, these strategies use transparent rules to target characteristics such as earnings quality, valuation discipline, growth potential and balance-sheet resilience."

Wickenden said the growth has changed the way portfolios are being built.

"Smart beta ETFs are increasingly being used as core building blocks, helping investors improve diversification, manage risk and enhance return potential alongside traditional market-cap strategies. In a market where scrutiny on fees and performance durability remains high, that value proposition is resonating strongly," he said.

"We believe financial markets are broadly efficient but offer the opportunity to construct all-weather core portfolios that combine low-cost beta with systematic factor exposures through smart beta ETFs expected to outperform over the long run."