BetaShares/Investment Trends 2016 Exchange ... - ETF Australia€¦ · Provide a good core of investment portfolio Trading flexibility Cost effective for large investments All current

Copyright 2017 Investment Trends Pty Led. BetaShares/Investment Trends 2016 Exchange Traded Funds Report – SUMMARY REPORT. Reproduction prohibited. 1

BetaShares/Investment Trends2016 Exchange Traded Funds Summary Report

Deep Insights Research Report released: December 2016 Reproduction Prohibited


© Copyright 2017 Investment Trends Pty Limited. All rights reserved.

The material in this Report (“BetaShares/Investment Trends 2016 Exchange Traded Funds Report: Summary Report”) contains proprietary information including copyright material and trademarks, the rights to which must be respected. Investment Trends owns the copyright in the design, selection, arrangement, production, and presentation of the Report, as well as in the material originally developed by or for Investment Trends. You may use copyright material for your personal or internal use within your business. Otherwise, and except as permitted by law, no copying, publication, modification or commercial exploitation of the Report is permitted without the prior written permission of the owner.

Except for any rights under any legislation in Australia or any other relevant jurisdiction which cannot be excluded or limited, Investment Trends does not provide a warranty with the Report or give an assurance as to its accuracy or reliability. Investment Trends shall not be liable for any damages you suffer, or which are claimed against you by a third party, arising out of use of the Report. You should particularly note that most of the issues covered in our Report(s) are in a continuous state of change and are likely to be appropriate only for the timeframe indicated. As such you must make your own enquiries regarding any aspect of the Report or research that you may seek to rely on and not rely solely on the Report for any purpose. You should also note that we rely on information provided to us through various research and data collection methods and whilst we have made our best endeavours to ensure reasonableness and accuracy, we have not audited the information and do not audit claims.

Analysis: Mark Johnston, Executive Chairman & FounderMichael Blomfield, CEODr Borhan Uddin, Director of Statistical ResearchRecep III Peker, Research DirectorCalvin Yap, AnalystMinh Phan, Analyst

Audience: Current and next wave investors of exchange traded funds

Financial planners

Data collected: August – September 2016

Collection method: Online surveys

Disclaimer


Research methodology

Dynamics and growth of the ETF market

Profile of ETF users

SMSF use of ETFs

Financial planners’ use of ETFs

Recap of key themes

Agenda


Research methodology

The September 2016 Exchange Traded Funds Report is the 8th annual study into the Australian ETF market and is based on two detailed online surveys.

1. The Investor Product and Marketing Needs surveyThis survey was conducted between August and September 2016 among two main groups of investors:

i) Respondents from Investment Trends’ opt-in panel who had taken part in previous investment related research.ii) Investors recruited from Investment Trends’ institutional clients, including a diverse range of investor information providers, product

providers, private banks, advice networks, and online brokers.

Close to 9,000 valid responses were received, including 1,400 respondents who were currently using exchange traded funds (ETFs), with a further 378 next wave ETF investors (who were currently considering, but not yet using ETFs). The maximum sampling error for current ETF investors at 95% confidence interval (centre of the range) is +/- 2.6%. Analysis of smaller subgroups will have a higher sampling error.

2. The Adviser Product and Marketing Needs survey This was a detailed quantitative survey of financial planners, dealer group managers and RG146 compliant accountants conducted between July and August 2016. The survey was conducted in two phases:

i) Core sample: Invitation emails were sent to planners who had previously participated in Investment Trends’ research. This was supplemented with invitations sent by Financial Standard, Money Management and Morningstar to their full databases of financial planners and associated professionals.

ii) Additional sample: Once the core sample was completed, a number of individual fund managers, ETF providers, and platform providers also invited planners on their own database to participate. These responses have been utilised where appropriate.

Total responses after data cleaning, de-duplication, and validation: n=592 financial planners, including RG146 compliant accountants, and dealer group managers who personally provide advice. The maximum sampling error (centre of the range) at the 95% confidence interval for this sample is +/-4.0%.

Responses to the survey were post weighted to ensure a representative sample with correct distribution by platform used, planning software used and dealer group.

Dynamics and growth of the ETF market


The number of ETF investors grew at an annualised rate of 31% in the 12 months to

September 2016

0

5

10

15

20

25

30

Market capitalisation of ETFs ($bn)

ETF market size

9.5k19k

38k53k

60k69k

102.5k

146k

202k

265k

315k

258k

Projection^

Projection for 2017

Projection in previous study

^Note: Projected figures based on Investment Trends modeling. Note that actual outcomes will be influenced by a range of factors, but particularly share market performance. Sourced from Investment Trends 2016 ETF Report.

Ma

rke

t c

ap

itali

sa

tio

no

f E

TF

s (

in $

bn

s)

Number of ETF investors

Number of ETF investors – projected outcome


Repeat investment into ETFs remains very high among current ETF investors

55%51%

69% 70%

79%

71% 70%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Dec-10 Dec-11 Nov-12 Nov-13 Oct-14 Oct-15 Sep-16

Proportion of current ETF investors who are considering re-investing in ETFs in the next 12 months


The majority of investments into ETFs represent new money into the industry

25%

9%

27%

50%

Direct shares:

Managed funds:

Cash & TDs:

Nothing, incremental investment:

What investments do next wave ETF investors plan to sell down to invest in ETFs?

(proportion citing each)

29%

10%

14%

56%

65%

27%

16%

Direct shares:

Managed funds:

Cash & TDs:

Nothing, incremental investment:

Direct shares:

Managed funds:

Cash & TDs:

What would current ETF investors have invested in, were ETFs not available?


What investments did current ETF investors reduce usage in order to invest in ETFs?


Profile of ETF users


A third of ETF investors are currently retired, with the typical ETF investor being

51 years old

Profile of current ETF investors:

One in three are retired

51 years old, on average

38% invest in ETFs via an SMSF


ETFs are becoming more mainstream, with younger investors increasingly embracing

these products

Profile of current ETF investors

Average

age

% investing in

ETFs via

an SMSF

Investable assets

as a multiple of the

average investor

By When investors first started investing in ETFs

58 5853 54

4739

45%55%

43%50%

29%

13%

More than

5 years ago

[n=136]

4-5 years ago[n=81]

3-4 years ago[n=97]

2-3 years ago[n=131]

1-2 years ago[n=213]

Less than

a year ago

[n=135]

1.5

1.2 1.1 1.00.8

0.4


37%

31%28%

0%

10%

20%

30%

40%

50%

60%

70%

Millennials Gen X Baby boomers

Proportion of online investors who currently use or intend to use ETFs in the coming year

Usage by millennial investors is expected to be a significant driver of future

ETF growth

Source: Investment Trends 2016 Australian Online Broking Report

SMSF use of ETFs


Use of ETFs among SMSFs and non-SMSFs continues to grow strongly

(more so among non-SMSFs)

^Source: Investment Trends SMSF Investor Reports

21k 19k 24k

39k45k

53k59k 60k

66k 69k82k

103k120k

146k

181k

202k

220k

265k

11k 10k12k 20k 23k 27k 31k 30k 32k 33k 38k 46k 54k 63k

76k 83k 90k 100k

0

50

100

150

200

250

300

ETF market size among SMSFs

Number of investors holding ETFs (incl. SMSFs)

Number of SMSFs holding ETFs (via their SMSF)

51% 50% 50% 51% 51% 51% 52%49% 49% 48% 46%

45% 45%

43% 42% 41% 41%

38%

Number of investors holding ETFs (incl. SMSFs)

Number of SMSFs holding ETFs (via their SMSF)

% of ETF investors holding ETFs via their SMSF


SMSFs who use ETFs typically cite a wider range of reasons for using them,

especially for access to overseas markets and access to specific investment types

77%

59%

47%

34%

35%

32%

23%

18%

20%

17%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Diversification

Access to overseas markets

Low cost

Avoiding risk through individual stock exposure

Liquidity/easy to buy and sell

Access to specific types of investments

Easier to access than unlisted managed funds

Provide a good core of investment portfolio

Trading flexibility

Cost effective for large investments All current ETF investors [n=945]

SMSFs who use ETFs [n=332]

Q125 Why do you use ETFs? (Multiple responses permitted) SMSFs who hold ETFs versus current ETF investors (Top 10 reasons shown)

Financial planners’ use of ETFs


15%25% 27%

31% 28%33%

40% 44% 43%17%

19%

27% 16% 19%17%

19%20%

16%

15%

11%

9%

12% 10%11%

9%

9%10%

53%45%

38% 41% 43% 40%32%

27%31%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2008[n=487]

2009[n=305]

2010[n=561]

2011[n=635]

2012[n=486]

2013[n=466]

2014[n=442]

2015[n=417]

2016[n=381]

Don't intend torecommend ETFs

Don't currentlyrecommend, but mayafter 12 months

Don't currentlyrecommend, but maywithin 12 months

Currentlyrecommend ETFs

Q56 Have you used exchange traded funds/exchange traded managed funds for your client investments? Among financial planners

Seven out of ten planners currently recommend ETFs or intend to do so in the future

47% 55% 62% 59% 57% 60% 68% 73% 69%

Currently recommend/

intend to recommend:


Use of ETFs is widespread among financial planners, with 7500 advising on ETFs

2200

35003800

45004000

4800

7000

7600 7500

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

2008 2009 2010 2011 2012 2013 2014 2015 2016

Planners currently advising on ETFs

In 2016, this represents:

44%

60%

79%

Of all planners Of planners who are

accredited to advise

on direct listed

equities

Of planners who

invested new client

money into direct

listed equities

over 2016


Planners who currently recommend ETFs are using these products more extensively

for new inflows, and plan to continue to grow their use

P = Planners estimate of figures in 3 years’ time

7%

9%

13%

17%

23%

4%5%

6% 6%

10%

0%

5%

10%

15%

20%

25%

30%

2013 2014 2015 2016 2019 (P)

Average % of inflows in ETFs among planners who recommend ETFs [n=107]

Average % of inflows in ETFs among all planners [n=335]

Q16 In the last year, roughly what proportion of the new client inflows you advised on went into ETFs? & Q17 What do you think these figures will be in 3 years? Averages among financial planners


Planners who recommend ETFs cite low cost as the top reason for using ETFs,

while diversification is the stand out driver among ETF investors

51%

72%

29%

52%

25%

94%

77%

58%

55%

45%

100% 80% 60% 40% 20% 0% 20% 40% 60% 80% 100%

Low cost

Diversification

Liquidity/easy to buy and sell

Access to overseas markets

Access to specific types of investments

Top 5 reasons for using ETFs Current ETF investors versus Planners who recommend ETFs

Current ETF investors [n=946] - LHS Planners who recommend ETFs [n=157] - RHS

Note: Background represents 2015 results


7k 15k 17k 18k 27k 39k 49k 57k

38k53k

60k69k

103k

146k

202k

265k

0

50

100

150

200

250

300

350

0

50

100

150

200

250

300

350

Dec-09 Dec-10 Dec-11 Nov-12 Nov-13 Oct-14 Oct-15 Sep-16

Involvement of advisers in most recent ETF investment

No. of ETF investors saying an adviser placed a role in their most recent ETF investment

No. of current ETF investors

18% 29% 29% 27% 26% 27% 24% 21%

% saying an adviser

played a role in most

recent ETF inv.:

There is significant opportunity for advisers to be more involved in ETF investments


Have used ETFs

& intend to continue

doing so, 43%

Haven't used, but may

after 12 months, 10%

Haven't used

ETFs & don't

intend to do

so, 26%

Haven't used, but may

within 12 months, 16%

2

3

4

5

6

7

30 35 40 45 50 55 60

Average funds under advice ($m)

Av

era

ge

le

ve

l o

f n

ew

in

flo

ws

($

m)

Q56 Have you used exchange traded funds/exchange traded managed funds for your client investments?

By Average FUA and new inflows (Bubble size represents proportion of planners in each category)

Among financial planners [n=381]

2016

2015

Planners who currently recommend ETFs typically have a higher level of

funds under advice and higher inflows


42%

38%

28%

39%

35%

18%

29%

28%

22%

22%

14%

12%

7%

6%

5%

28%

12%

16%

9%

15%

16%

0% 10% 20% 30% 40% 50% 60% 70%

International equities (Active)

Australian equities (Active)

Fixed income (Active)

International equities (Index)

Australian equities (Index)

Fixed income (Passive)

Infrastructure (International)

Property (Australian)

Infrastructure (Australian)

Property (International)

Multi-asset class

Goals-based/outcome-oriented

Smart beta

Currency

Commodities

Corporate bonds (Australian)

Corporate bonds (International)

Factor-based

Leveraged/geared

Inverse/short

Other

I don't know

Q71 Which of the following types of ETFs/ETMFs would you like to use in the next 12 months, assuming

they were available to you? (Multiple responses permitted) Among financial planners [n=379]

Clusters^:

Passive (44%)Alternatives (42%)

Active (52%)

Innovative (20%)Currency & commodities (20%)

Bonds (18%)Not part of any cluster

Note: Planners might perceive a lack of availability of these ETFs if they are not available via their dealer group/investment platform/APL etc.

^Percentages account for overlaps

Planners have a strong interest in actively managed ETFs


Key themes

Retail ETF investor numbers continue to rise rapidly despite headwinds posed by market conditions

ETFs’ ability to provide low cost, diversified solutions are being embraced by investors across the wealth spectrum, from lower balance investors to SMSFs. Usage by millennial investors is expected to be a significant driver of future ETF growth

Seven in ten planners currently recommend ETFs or intend to do so in the future. Planners who do recommend ETFs continue to allocate larger inflows into the product and plan to continue this growth

There is significant opportunity for advisers to be more involved in ETF investments

Looking forward, there is a broad appetite among planners to use a wider range of ETFs, especially products providing exposure to actively managed equities, infrastructure and property

Thank you!Questions?


BetaShares is a leading Australian manager of ETFs and other Funds that are traded on the Australian Securities Exchange (‘ASX’).

BetaShares’ aim is to provide intelligent investment solutions, which help Australian investors meet their financial objectives.

With a broad range of products now trading on the ASX, the BetaShares range of Funds is one of the largest and most diverse available in the market.

BetaShares offer investors simple to use and cost-effective access to equities, cash, currencies, commodities and alternative strategies.

As at December 2016, BetaShares manages over $3.3 billion in assets.

BetaShares is Australian owned and managed, and is a member of the Mirae Asset Global Investments Group, one of Asia’s largest asset management firms. As at December 2016, Mirae manages approximately US$100 billion globally.

About BetaShares


Investment Trends is a specialist research organisation

which provides new business insights and decision

support information to many of the world’s leading

financial services organisations. We combine analytical

rigour and strategic thinking with the most advanced

market research and statistical techniques to help our

clients gain competitive advantage.

Investment Trends is a multi-national research

organisation servicing clients in Australia, Asia,

Europe and the US.

Our clients include the industry regulators, peak

industry bodies, all of the top 6 Australian banks, top 10

investment platform providers, top 6 online brokers, as

well as most leading fund managers and industry super

funds, margin lenders, dealer groups and financial

planning software providers.

About Investment Trends

Our work is focused on helping clients answerthree fundamental questions:1. How does the market currently work?2. How is the market evolving?3. How do I improve business outcomes:

• Acquire more customers• Retain more existing customers• Increase revenue per customer• Prioritise technology and process

investments


Sydney LondonInvestment Trends

6 London Street London, EC3R 7LP

United Kingdom

+44 203 741 [email protected]

Investment Trends23.02 Tower 3, International Towers

300 Barangaroo Ave, Sydney NSW 2000Australia

+61 2 8248 [email protected]

Documents

BetaShares/Investment Trends 2016 Exchange ... - ETF Australia€¦ · Provide a good core of investment portfolio Trading flexibility Cost effective for large investments All current