ETFs

Summary:

The inclusion of global ETFs, specifically the US and Europe, is intended to provide two types of investor insights and that are ultimately pertinent to the Australian ETF market. Firstly, inflows / outflows data and which clearly provides a strong signal regarding investor sentiment regarding asset classes, geographic preferences or otherwise, thematic / sector preferences, and finally fear and greed levels.

Secondly, new issue ETFs reflect ‘real-time’ investment theme investor sentiment. i.e, what’s ‘hot’. Additionally, the largest Australian ETF issues are all part of large international entities. And often what ETF is issued in their home markets and, to some degree, subsequently issued in Australia.

Australian ETF News

Schroders expands active ETF suite. Schroders Australia has launched a new active ETF, bringing a listed version of its Global Core active strategy to market. Schroders listed the Schroder Global Core Fund – Active ETF (ASX: CORE) today, marking its fifth active ETF. The launch is a celebration of its Global Core active strategy celebrating 25 years in market. CORE is an actively managed, quantitative global equity strategy and is priced at 0.25% per annum with no performance fees. The portfolio typically holds about 400 global companies, derived from a universe of over 15,000. The underlying strategy has outperformed its benchmark in 20 of its 25 years.

Betashares to expand into private credit ETFs. Betashares expects its private asset business to launch by offering investors access to private credit products in the United States. While the details have yet to be finalised, Betashares said the first funds would be highly diversified and very cost-effective strategies. Interest from ASIC has not dulled demand for private credit, although some financial advisors have become wary. Last week, one of the sector’s biggest players, Metrics Credit Partners, said it raised $315 million for its flagship listed fund amid strong demand. There is more than $259 billion invested in ETFs listed in Australia, a 33% increase in the 12 months to April 30. BetaShares has been the second-most popular ETF provider for the year to the end of April, accounting for about 27% of inflows.

Australian ETF investors are allocating more money to bitcoin than gold in a major rotation that points to growing acceptance of the world’s largest cryptocurrency as a store of value and portfolio hedge amid the volatility of Donald Trump’s trade war. Australian bitcoin ETFs attracted $87.3 million last month, far exceeding the $1.5 million that flowed into gold bullion ETFs. Bitcoin ETFs in the US attracted more than $US9 billion in capital over the five weeks to May 29 including $US6.35 billion flowing into BlackRock’s Bitcoin Trust. That was its largest ever month of inflows. Here’s the only sensible thing we know about Bitcoin and gold: they are distinct asset classes. The two have a negative correlation in ETF flows – when money moves into one, it tends to flow out of the other. That’s consistent with how investors position them; gold is a defensive, risk-off asset, and bitcoin is a high-conviction, risk-on bet.

US ETF Flows by Asset Class

 The value of ETF flows data is relatively obvious – it highlights asset class inflows and outflows. As such, it illustrates investor asset class preferences at any given time. Relative to the ASX data, which is monthly, US data is available on both a more frequent and timely basis.  The data below is as at 6 June 2025.

US ETF Flows Focus

 US Long-end Treasuries ETFs – Retail Investors keep Piling in to take that Yield & Convexity. The iShares 20+ Year Treasury Bond ETF (TLT) is one of the most popular options for investors seeking to establish exposure to long-dated Treasuries, an asset class that is light on credit risk but may offer attractive yields thanks to an extended duration and therefore material interest rate risk. For those looking to extend the duration of their portfolio and potentially enhance the current return offered, TLT can be a useful product.

 The retail trade has been clashing with the institutional trade pretty much all of 2025 and particularly since early April. While insto investors have shunned the US treasuries long-end, TLT has taken in billions of dollars over the past couple of weeks. And for some this has been a widow maker trade. It feels like yields, long end yields in particular have just been on a roller coaster. So how do you explain just this off the charts demand still for long end bonds in particular, and from retail investors?

In short, there seems to be an insatiable demand when long bonds and the 10-year bond hits 5% and retail investors just keep hoovering them up. It’s actually served to limit the 30-year moving meaningly above 5.0%, or at least sustainably so.

But how can you explain this concept of buying TLT, yielding 5%, when you can get almost the same yield in a money market fund or the short end of the curve, specifically circa as high as 4.7%. Why bother with the duration risk? Or is this a bet on the Fed? Yes, it’s the latter. The long-end gives you convexity, the short-end doesn’t. And at some point the Fed will begin cutting rates.

And furthermore, while the Insto market is focusing on the belly of the curve, 3- to 7-year, the retail investors are not. The attitude appears to be ‘if I’m going to take risk, I want to take more risk’. Anyway, so far this year it has been a one-zero scoreline of retail investors (the ‘dumb money’) over institutional investors (the ‘smart money’). We can see the merit in the trade. To our mind, the probability of the 30-year yield being below 5% is higher than being above. You get a higher yield, and you get an extra kicker from the convexity when the Fed inevitably starts cutting again.

Global Select ETF Launches

 New issue ETFs reflect ‘real-time’ investment theme investor sentiment. i.e, what’s ‘hot’. Additionally, the largest Australian ETF issues are all part of large international entities. And often what ETF is issued in their home markets and, to some degree, subsequently issued in Australia.

Regarding the table below, there are several distinct themes reflecting investor preferences currently:

• German equities ETFs – Germany has been running hot all of 2025. Initially it was a relative value play vs the US. Then it became a defense sector play as well as the major theme of a diversification away from the US.
• Income related ETFs – defensive, fixed income products, partly reflecting the more defensive or at least diversification of portfolios given a range of uncertainties, particularly in the US and in US equities.
• The Innovator Capital Management launched the Innovator Equity Managed 100 Buffer ETF is an interesting product. It is an actively managed solution that seeks to provide 100% downside protection through a one-year laddered options portfolio. It is reflective of many ETFs that have been issued over the circa last 4-6 weeks particularly in the US – equities exposure but with either downside preservation or downside protection.
• Global / international equities ETFs. Same theme – diversification away from the US.
• Franklin Templeton to convert 10 Putnam Municipal Bond mutual funds to ETFs. I wonder why. These is a very common dynamic these days.

Figure - Select ETF Launches, to May 30th 2025

Select European ETF Launches
STOXX launches DAX Composite Indices
First Trust launches three ETFs on Deutsche Börse
Crédit Agricole and Solactive launch Solactive Constant Maturity Government Bond Index Family
Janus Henderson launches UCITS mortgage-backed securities ETF
Franklin Templeton to convert 10 Putnam Municipal Bond mutual funds to ETFs
Select US ETF Launches
Vontobel Asset Management, Inc. launched the Vontobel International Equity Active ETF
Lazard Asset Management converted the Lazard International Equity Advantage mutual fund into an ETF
Innovator Capital Management launched the Innovator Equity Managed 100 Buffer ETF
Russell Global Infrastructure Active ETF

^{*Closing price as at end of week. Returns in AUD before fees}