Australian investors are increasingly turning to cash exchange traded funds (ETFs), investing more than $1.6 billion in these products in the past year alone.
Spurred on by the appeal of fixed returns that beat an average bank savings account, Stockspot found, in the latest 2023 Stockspot ETF Report, that cash ETFs are now some of the largest growing areas of the Australian ETF market, collectively managing more than $4 billion in funds under management.
In contrast, active ETFs experienced some of the sharpest falls in assets driven by net outflows from investors, with two Magellan ETFs losing more than $2.2 billion over the past year to 30 September 2023. Other losers were renewable energy ETFs and ETFs that track property and infrastructure, which experienced significant losses.
“Cash ETFs, which invest in interest-bearing instruments like bank and term deposits, or short-term money market instruments, are on the rise. We’ve found that investors are choosing these products for their great returns and because they simply don’t have the same hassle and conditions of a high interest bank account,” Stockspot founder and CEO, Chris Brycki said.
“In our 10 years of researching the more than 250 ETFs on the ASX and Cboe Australia, this is the first time cash ETFs have received so much interest from investors and they are proving to be cash cows.”
Mr Brycki also highlighted that cash ETFs are favoured by investors as they typically outperform an average bank account.
“Savvy investors also know that cash ETFs are more likely to beat the RBA cash rate whereas simple bank cash accounts simply do not pass on the full rate increases to their savers. So, in a way, these investors are beating the banks at their own game.”
The other surprise in the report was the increased popularity of uranium ETFs, according to Mr Brycki.
“Uranium companies benefitted as the price of uranium reached its highest level since 2011. One uranium ETF rose by nearly 50% in the past year alone.”
The Stockspot research found that renewable energy ETFs have been some of the worst-performing ETFs in the same period.
“Renewable and clean energy stocks have faced headwinds of rising interest rates which have increased borrowing costs and capital expenditure outlays,” Mr Brycki said.
“ETFs tracking particular sectors like property and infrastructure have also performed poorly in the face of higher interest rates.”
Investors should, according to Mr Brycki, just focus on playing it safe and invest in simple vanilla ETFs that track the entire market, rather than niche sectors. “This is the best way to get exposure to the market and not have to worry about which stocks to pick.”
Download the 2023 Stockspot ETF report.
Key Facts:
- A record $1.6 billion has been invested in cash ETFs in the past year alone
- Collectively, cash ETFs now make up more than $4 billion of the $150 billion Australian ETF market
- Uranium ETFs were also popular, with one uranium ETF rising by more than 50% in the past year alone
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Stockspot is Australia’s leading online investment adviser and fund manager. Since 2013, we have helped thousands of Australians create financial freedom. We are an independent thought leader on wealth creation, guiding our clients on a better way to invest for the long-term. Our philosophy is built on the values of simplicity, consistency and discipline.
Clients can start with as little as $2,000 and the service is free for investments under $10,000 for the first six months. We make investing easy and affordable. Our investment strategies have achieved a eight-year track record of consistent positive returns.
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