Australian ETF growth surges

• By Keith Griffiths on 9 November 2011
• Money Management

Australian exchange traded fund (ETF) market capitalisation continued to grow in October, more than doubling its September intake, according to the latest BetaShares Australian ETF Review.

Currently the ASX ETF market cap is trading around $5.2 billion. The review also highlighted that October was one of the largest month-on-month increases in ETF growth, with 7 per cent or $342 million in new units created. This compares to 3 per cent on average over the last 24 months.

"Also encouraging was the strong trading and inflows across a variety of asset classes," said Drew Corbett, head of investment strategy of BetaShares.

International ETFs saw net buying and trading volumes increase "indicating a perceived value in global equities," the report stated.

With the increased volatility in the AUD/USD the currency ETF also was also popular, increasing 32 per cent in traded volume over the period.

Precious metals had a mixed couple of months with new money going into silver, platinum and palladium. However, unhedged gold holdings had net outflows of $14 million, with hedged gold ETFs receiving approximately $5 million in new money.

Creation and redemption activity was mixed across the providers. The State Street broad S&P/ASX 200 ETF had significant net new money of around $64 million, while the Russell Dividend ETF had a significant net redemption of $42 million. iShares had increased interest in emerging market ETFs and experienced a 23 per cent increase in October to over $600,000 per day, the report found.

Gen Yers turn to social media for financial advice

Interesting article about trends for sourcing financial advice.

Gen Yers turn to social media for financial advice
Monday, 14 March 2011 1:00pm
By Elise Burgess

Generation Yers are seeking advice much sooner than their parents, but not always from the usual sources, with around 33 per cent using social media for financial advice.

Based on a survey of 963 adults aged between 21 and 80 years, conducted by TD Ameritrade Holding Corporation late last year in the US, Gen Y is now adopting a far more collaborative approach to handling their financial matters, using multiple sources when seeking advice.

The Annual Investor Index survey found that some 60 per cent of survey respondents aged between 22 to 34 ask friends, relatives and colleagues about finances and investing.

This compares to just 43 per cent of Baby Boomers and 31 per cent of Boomers' parents that reported the same sources.

Further differentiating Gen Y, around 33 per cent or one in three respondents look to social media to get financial advice and to learn more about financial markets.

The survey also found that Gen Y are starting to take care of their finances at a far earlier age then their predecessors, learning from the Global Financial Crisis and actively engaging in their own savings.

"Many of them witnessed their parents' and grandparents' financial struggles firsthand," said Stuart Rubinstein, managing director of client engagement at TD Ameritrade.

"They're not afraid to ask for help or information —in fact, the more the better. At the end of the day, they just want to be able to make educated decisions, and that's a very healthy attitude for today's investors to have."

Bernard Salt, KPMG partner, said that it will be the Baby Boomers and Gen Y that will present the biggest shift for advisers and that these are markets advisers must cater for if they are to maintain a high quality of advice.

According to Salt, it is the shifting attitudes of Baby Boomers and Gen Y that is changing the face of financial advice.

"This will be a big opportunity for financial planners… we are not just going to see a volume shift in the next few years but also a value shift," said Salt

Rise of in-house fund mgmt a game changer

Are pressures on the overall supply chain forcing systemic change in the industry ?

Rise of in-house fund mgmt a game changer

Wednesday, 6 October 2010 12:55pm

A shift of government super funds towards in-house management could threaten the raison d'etre of some of Australia's largest investment managers.

In its recently released results, state owned fund manager Queensland Investment Corporation (QIC) disclosed that its after-tax operating profits fell almost 30 per cent in the year to 30 June to $26.3 million.

Its funds under management (FUM) fell by a whopping $10.5 billion after QSuper - the super fund for Queensland government employees - decided to become a regulated superannuation fund and begin in-sourcing functions such as strategic investment advice and investment administration, which had previously been provided by QIC.

A weaker relationship between QSuper and QIC raises questions around the latter's reason to exist, potentially creating concerns for other state owned fund managers including VFMC and Funds SA.

QIC paid a dividend of $13.2 million to the Queensland government, down from $18 million in the preceding year - but that is small change for a government operating on a $42 billion dollar budget.

QIC said that it remains QSuper's largest provider of investment services, managing over $17 billion for the super fund across a variety of asset classes.

And despite the decline in FUM stemming from QSuper's shift, with $51.6 billion under management, QIC remains one of the country's ten largest fund managers as of June 30th, according to data complied by Rainmaker Information.

The fund manager has over 70 institutional clients and recent business wins include a $500 million property mandate from the country's largest industry fund, AustralianSuper, back in April.

Investors call planners to charge performance-based fees

Investors call planners to charge performance-based fees

Thursday, 26 August 2010 11:50am

Performance-based fees have traditionally been the domain of fund managers - but research shows a growing number of investors are urging financial planners to start adopting this fee structure.

Mark Johnston, principal of research firm Investment Trends and speaker at this morning's Rainmaker Marketing Symposium, said an emerging trend among retail clients is their preference for advisers to charge performance-based fees, rather than a commission or asset-based model.

"About 19 per cent of investors say their preferred model for paying an adviser is performance-based fee."

"That's one area that has a little bit of differentiation, [in that] advisers try and convince their clients that an asset-based fee for service [model] is really like a performance-based fee anyway," he said.

Calls for changes in adviser remuneration also go along with increasing client dissatisfaction with fee levels.

Around 40 per cent of investors expect to pay lower advice fees following the dent to their portfolios in the wake of the GFC.

And while discussions continue to swirl around fees for service versus commissions, with the government proposals to ban commissions by July 2012, the difference of fees charged for both models can sometimes be negligible.

"Above a certain threshold of assets ... the actual advice fees, not counting the product and administration fees, is almost always about 70 to 80 basis points on average.

"That's actually true regardless of how it's collected. You'll find that 70 to 80 basis points come through whether it's an asset-based fee, fee for service or commission model," he said.

Johnston said the renewed focus on low-cost investing has accelerated demand for exchange traded funds (ETFs), direct shares and separately managed accounts (SMAs).

More planners bypass managed funds: study

More planners bypass managed funds: study

Tuesday, 17 August 2010 1:10pm

Fund managers are put on notice in a recent investment study that found a growing number of planners are placing their clients' funds into direct shares, ETFs, REITs and SMAs, leaving only a fraction of inflows into traditional managed funds.

The survey pooled the views of over 700 planners in April and May this year, a small sample when compared to the 18,000-plus financial planners in Australia. However, their collective insight still gives some indication on where new money is flowing post-GFC.

The Investment Trends research found that more than two thirds of all planners now advise on direct shares, and this group expect their allocation to direct equities to rise from 23 per cent of their funds under advice (FUA) today to 34 per cent by 2013.

Mark Johnston, principal of the firm said that the move to offer direct equities started in 2008, but the combination of poor returns from some managed funds and lower costs of non-managed fund alternatives, have accelerated the trend.

"Direct equities spiked to 20 per cent of new inflows invested for clients, with growth also seen in the proportion going into ETFs, REITs and SMAs," he said.

This meant inflows into unlisted managed funds dropped from 62 per cent to 50 per cent compared to the year before.

"This is a massive shift in planner behaviour," he said.

According to the research, the planners that poured more than half of their recent client inflows into direct listed investments only invested 7 per cent into managed funds.

Johnston said that direct equities, once the domain of stockbrokers, is now a core part of a planner offering. Planners currently advising on direct shares expect to increase the proportion of their clients using this advice to grow from 30 per cent to 43 per cent over the next three years.

But it's not all bad news. Practically all the major fund managers in the country offer planners 'model portfolios', which are exactly the same portfolios they run except they're not managed within a unit trust structure. Planners pay them fees for their 'intellectual property' and, in return for lower fees, the fund manager does not have to do all the admin-related duties attached to these model portfolios.

Planners flock to direct equities

Planners flock to direct equities

Driven by client demand

Victoria Papandrea

By Victoria Papandrea
Tue 17 Aug 2010

Advisers are increasingly turning to direct equity investments for new client funds, according to an Investment Trends report.

Financial planners are increasingly turning to direct equity investments for new client funds, according to the latest report from Investment Trends.

The research, which was based on a survey of over 700 financial planners in April and May 2010, revealed a surge in direct equity investments driven by client demand.

Direct equities spiked to 20 per cent of new inflows invested for clients, with growth also seen in the proportion going into exchange traded funds (ETFs), real estate investment trusts (REITs) and separately managed accounts (SMAs).

"Planners have been gradually increasing their use of direct shares and other listed investments since 2008. But this year has seen a dramatically larger shift," Investment Trends principal Mark Johnston said.

The survey indicated that just half of recent inflows were directed to unlisted managed funds, down from 62 per cent the year before.

"This is a massive shift in planner behaviour," Johnston said. "Planners estimated just 39 per cent of inflows would be directed to unlisted managed funds by 2013.

"Two thirds of all planners now advise on direct shares, and this group expect their allocation to direct equities to rise from 23 per cent of FUA [funds under advice] now to 34 per cent by 2013."

The research indicated a third of planners placed more than half of recent client inflows into direct listed investments broadly, which included shares, hybrids, ETFs, REITs, SMAs, and listed investment companies.

"Planners in this high usage segment placed just 7 per cent of recent inflows in managed funds", Johnston said.

"That appears in part to be a response to the increased investor fee aversion, and dissatisfaction with managed fund performance identified by our research. Client demand was a major catalyst for higher direct equities use."

The survey also found the number of planners advising clients on direct shares is also on the rise; two-thirds of planners currently advising on direct shares intend to continue doing so, while another 10 per cent of planners expect to begin over the next three years.

Direct Equities

HNW investors to favour direct equities

Advisers focus resources on shares

Victoria Papandrea

By Victoria Papandrea
Tue 16 Jun 2009

High net worth investors are likely to have the strongest product demand for shares over the next two years.

Australia's high net worth (HNW) investors will have the majority of their money invested in direct equities over the next two years, according to a new survey by Datamonitor.

HNW investors are expected to have up to a quarter of their total investment portfolio in shares by 2011, the survey found.

Wealth managers servicing the financial needs of HNW individuals expect more than 90 per cent of their clients will demand direct equity investments over the period.

While many investors have lost money in shares over the last 18 months, the demand for equities from HNW clients is set to increase as signs of a market recovery begin to emerge, Datamonitor wealth analyst David Lalich said.

"If the stock market continues to rally this year we should see a wave of new investment from HNW individuals, and while many will have learnt lessons from the equity crash, ultimately this will not discourage them," he said.

"These are typically opportunistic individuals that want exposure to the best opportunities for growth in the market."

With client demand expected to be so strong in the area of direct equities, the survey found 44 per cent of wealth managers expect to focus their resources into these investment products over the next two years.

A smaller percentage of wealth managers surveyed said they would focus on developing other investment areas such as property funds, capital-protected funds, exchange-traded funds and currency trading.

Go to today's InvestorDaily news

More stories by this author