The best performing ETFs in Australia
Interest in cryptocurrency and artificial intelligence has fuelled triple-digit annual returns for a handful of exchange traded funds.
There's been no letup in the enthusiasm for exchange traded funds (ETFs) among Australian investors, with the local ETF market recording $18.5 billion worth of net inflows over the last 12 months.
Investor inflows along with positive market movements helped lift the total funds under management in the Australian ETF sector from $142.5 billion to $196.6 billion, according to the latest analysis from provider Global X ETFs.
Marc Jocum, product and investment strategist at Global X ETFs, believes that a combination of the ongoing enthusiasm for low-cost investing, greater options across asset classes and increased ETF adoption among advisors all contributed to the uptick.
"Investors can access a range of asset classes for a fraction of the cost of what they normally would have to pay in a traditional managed fund, so because the average ETF is over half the cost of an unlisted active fund, you're seeing a lot more movement going into low cost vehicles," he says.
"Another reason is the different products that have become available within the ETF landscape which weren't always easily accessible elsewhere. Last year was a great example where investors were exploring asset classes like bonds and fixed income, and that helped bring more money into ETFs."
Which ETFs were the most popular with investors?
Global X found that the overwhelming majority of money flowing in has been directed towards ETFs focused on global shares ($6.5 billion), Australian shares ($6 billion) and bonds ($5.4 billion).
Unsurprisingly, low-cost funds holding the top companies listed on the Australian Stock Exchange (ASX) were among the favourites for investors over the past year.
Vanguard's Australian Shares Index ETF attracted $1.8 billion worth of inflows, and that was followed by Betashares' Australia 200 ETF with $1.4 billion and iShares' Core S&P/ASX 200 ETF with $1.1 billion.
Meanwhile, Global X found that the amount of money being invested into cash ETFs - which had been popular as interest rates climbed - has dried up recently as investor risk appetites have increased.
Investors also appear to have been less enamoured with a number of active ETFs, with the $2.2 billion flowing out of Magellan's Global Fund - Open Class Units (Managed Fund) topping the list for negative flows over the past year.
"It's quite an interesting conundrum because active ETFs accounted for over half of the new fund launches over the last year, yet they saw around a billion dollars in outflows in 2023," Jocum says.
"And so far in 2024 they are still in negative territory. They have recovered a little bit though, so the bleeding has kind of stopped."
What were the highest performing ETFs?
When it came to performance, cryptocurrency and technology-themed ETFs led the way over the past year, with some having notched triple-digit returns.
Global X's 21Shares Bitcoin ETF took out top spot over the 12 months to March 31, recording a 168.3% return. That was followed by Betashares' Crypto Innovators ETF (up 161%) and Global X's 21Shares Ethereum ETF (up 108.5%).
"When looking at some of the best performing ETFs over the past year we found that a lot of what we call risk-on investments did quite well. One of those is cryptocurrencies, which did really well," Jocum says.
Jocum says that local cryptocurrency-themed ETFs were buoyed on by the decision to approve spot Bitcoin ETFs in the United States earlier in the year which has led to considerable investments in the newly launched funds.
"As we saw tens of billions of dollars flow into these products there was naturally more buying of the underlying cryptocurrencies - the supply had to meet the demand - which naturally increased the price," he says.
"Another area that did quite well was broader technology areas. ETFs tracking some of the Magnificent Seven stocks like Apple and Google have done exceptionally well driven on by really strong earnings."
Inverse leveraged funds were among the poorest performers, though Global X says that this isn't surprising given the strong upswing in the market during the first quarter of the year.
Energy transition-related ETFs such as Betashares' Solar ETF (down 28.3%) and Global X's Hydrogen ETF (down 25.8%) also struggled.
Looking ahead, Jocum expects the local ETF sector to keep on growing as more ETF options come online and Australians continue to seek low-cost, diversified investment options.
"If the ETF industry keeps growing at its current rate of about 30% to 40% per year, we could be at $1 trillion by 2030. So as we see more products come to market and demand for those products grow I think we'll see the industry go from strength to strength."
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