(Pictured: Jim Ross)
It’s taken a while, but the world’s largest ETF has finally listed in Australia. The bell was rung for the State Street Global Advisors SPYDR S&P 500 at the ASX in Sydney last week. It is the fifth US ETF to list in Australia.
The ETF market, pioneered by SSgA in Australia from 2001, is currently worth about $13 billion across 97 funds, with the international funds growing fastest. They represent 36 per cent of the assets, compared with 19 per cent three years ago.
Amanda Skelly, head of ETFs for SSgA in Australia, said that ETFs were growing three times faster than the whole superannuation industry and eight times faster than the managed funds industry – admittedly from a low base. While SMSFs were an important part of the customer support, representing about one third, there was increasing institutional use of ETFs as an asset allocation tool, say, instead of futures contracts.
Jim Ross, global head of SPYDR ETFs, predicted continued strong growth for the sector in Australia, as elsewhere. “Within the next couple of years we expect the market to be worth $25 billion and then over $40 billion within three or four years. By comparison, Canada, which is similar to Australia, is already at $60 billion.”
Interestingly, offshore investors are important, too, to the Australian ETF market. Lochiel Crafter, SSgA’s Asia Pacific head, said about 20 per cent of the unit holders in the S&P ASX 200 ETF were offshore based.
“We’ve worked hard over the past few years to build a complete set of asset allocation tools,” Crafter said.
In the US, there is also an array of factor-based ETFs, allowing investors to tilt their portfolios to factors such as value, quality and low volatility stocks. The US also has actively managed ETFs, which are not permitted by the ASX in Australia.
Skelly said that about 40 per cent of SPYDR ETFs were owned by institutions, with many of them using the products for their dynamic asset allocation strategies, especially in niche markets such as emerging market debt.