Market Update - January 2021

With new market statistic out from the ASX we can see that ETF funds under management in Australia continued on its upward trajectory to now sit at $96 billion as at the end of January 2021. At this rate we would expect $100 billion to be hit by March/April, a significant milestone for Australian ETFs.

This growth has been pushed up by the Magellan Global Fund Open Class ETF (MGOC) which was added in November last year along with its $12bn worth of holdings at the time. Some may argue that this artificially inflates the market but even if you take that out, the market grew to $82 billion which is not an insignificant amount if you look at where we were in previous years (end of Jan 2018 was $36.2 billon, Jan 2019 was $42.3 billion, Jan 2020 was $65.7 billion). The dip experienced in March has more than recovered and ETFs are growing strength to strength.

Another area often looked at is Net Inflows and in January we saw VAS, IOZ and NDQ make up the top 3 ETFs. This is typical as these funds often make up what is part of the "core" of a core/satellite type portfolio that many investors go for. So it's not unusual to see them at the top. In the rest of the top 10 there were some notable performers from the ESG space. ETHI and FAIR (both from BetaShares) had $59 million and $36 million of inflows in the month and this showcases the continued growth and popularity of ESG related ETFs.

ETHI tracks the Nasdaq Future Global Sustainability Leaders Index which has a number of household names in its holdings base. These include Apple, nVidia, Tesla and Paypal for example. Tesla is interesting because at one point in time - end of 2019/early 2020 - it was ranked highly on ESG ratings by index provider MSCI but on the FTSE ESG ratings it was lower. ESG does depend on how holdings are being screened, either exclusionary (avoiding certain sectors or stocks) or postively (highlighting leaders in specific ESG related areas).

What's important is for investors to look at underlying holdings which they can typically do through the PCF (portfolio composition files) updated regularly by ETF issuers. They can also subscribe to the abundance of materials provided by ETF issuers each week, month quarter. There is a tonne of information out there.

For more on ESG and how it performed in 2020, check out our article here: The Rise of ESG Investing in Australian ETFs.