“There’s no magic formula for measuring growth for Australia’s top ETP managers, but a multi-factor approach highlights what managers are doing right and wrong,” said John Dyall, head of investment research at Rainmaker Information.
Growth rates of managers in the Australian ETP market can be measured in different ways:
“Size is a determining factor for how successful a manager is in the ETP space, but it only tells part of the story,” said Dyall.
As at 30 September 2024, Vanguard was the largest manager by FUM, accounting for 33% of the total market with $62 billion being managed, according to the latest Rainmaker Information ETP Report.
From a growth in FUM perspective Vanguard grew $15.8 billion — the highest of the managers — which was a growth rate of 34%.
While that growth rate appears exceptional, it puts Vanguard in fifth place among the top six managers and less than the 37% FUM growth enjoyed by the total ETP market.
The top performer on this metric was VanEck, which had FUM growth of $7.5 billion, which increased the manager’s total FUM by 55% on the previous year.
“Net flows is one of the most important metrics for measuring growth, since it does not take into account changes in FUM due to market returns, although market returns play a part in attracting funds flow,” said Dyall.
By this metric Vanguard wassecond highest with net flows of $7.4 billion.
As a percentage of the growth rate attributable to net flows, however, it was 16%.
This was equal to BlackRock (with net flows of $4.5 billion), but ahead of State Street (1% growth on net flows of $0.1 billion).
While Betashares had the highest net flows ($8.2 billion), VanEck’s net flows were the greatest contributor to funds growth from a percentage perspective, being 38% on net flows of $5.2billion.
“The FUM change from product returns is heavily dependent on the asset classes being represented,” said Dyall.
“In the 12 months to September 2024 Australian equities returned 22% and international equities returned 31% while fixed interest returned around 8%.”
“Managers with large cash products and other products with more modest returns enjoyed less growth.”
Betashares, for example, had 15% of its FUM growth attributed to product returns.
The mix of products, and their popularity, has a large impact on FUM change from returns.
For many managers the change to revenue would be the most important metric for growth.
These ranged from a high of 37% (VanEck) to a low of –33% for State Street.
For State Street this occurred despite positive FUM change of 20%.
This was due to a huge reduction of fees to 12 out of 15 State Street products.
Fees for its largest product, SPDR S&P/ASX 200, were reduced from 0.13% pa to 0.05% pa, a drop of 62%.
“State Street’s fee reductions had impacted net flows during the year,” said Dyall.
“The first six months to March had negative net flows of $120 million while the second half had positive net flows of $219 million.”
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Total risk market inflows were down a marginal 0.6% over the year to June 2024, decreasing from $18.3 billion to $18.2 billion.
Dual access ETPs, which are transacted both on stock exchanges and off-market through funds managers, can cost four times as much as the rest of the Australian ETP market.
