The Australian exchange-traded fund (ETF) market is experiencing a significant boom, primarily driven by younger investors seeking accessible and transparent options. State Street, a prominent global ETF provider, projects the local market could swell to $380 billion in funds under management by 2026, a leap from $320 billion last year and $71 billion in 2020. The Boston-based firm also anticipates ASX-listed ETFs, first offered to Australian investors in 2001, will exceed 500 by year-end, up from 470 in March.
An exchange-traded fund (ETF) allows investors to purchase bundles of shares or other assets that track a specific index or investment theme. This growth coincides with a volatile share market, where active fund managers have faced losses. State Street’s Jeff Sardinha noted that younger people primarily drive this phenomenon, appreciating ETFs’ convenience and transparency. He highlighted that younger investors and advisers are more likely to incorporate ETFs, with providers actively enhancing digital platforms to engage millennial and Gen Z traders, aiming for over three million Australians using ETFs this year.
Sector-specific ETFs are also gaining traction, notably in the burgeoning space sector. Betashares recently announced plans to launch a space ETF (RCKT) next month, subject to regulatory approval, while Global X intends to bring its Nasdaq-listed space technology fund (ORBX) to the ASX this year. This trend reflects broader interest in space exploration, with global investors watching developments like Elon Musk’s anticipated SpaceX market debut. Currently, Vanguard leads the Australian ETF market with 27.5 per cent of funds under management, followed by Betashares (19.3 per cent) and BlackRock’s iShares (16.5 per cent).
