The surprising trends in new ETF listings

There’s no question that 2022 was a big year for the ETF industry in Australia. There were 41 new ETFs launched, almost double the number of any previous year. The reasons for such an extraordinary volume of launches vary, but there’s also some interesting trends that emerge from taking a closer look at the new listings.

Global X ETFs recently released The Australian ETF Landscape H1 2023, a comprehensive guide to every listed ETP on the ASX and CBOE. You can take a look at the guide here.

Beyond highlighting the sheer volume and diversity now accessible on the ASX and CBOE, readers might notice a few other trends which I’ll explore further in this wire.

Firstly, the numbers….

• 41- the number of new listings in 2022

• 2- the number of cryptocurrency ETFs listed (a first in Asia-Pacific). It is also the number of carbon trading ETFs listed (another first).

• 34.1% - the portion of new listings focused on environmental themes including carbon capture, energy transition, or ESG more broadly.

• 51.2% - the portion of new listings from just two issuers: Global X ETFs and BetaShares.

Why so many listings?

Livewire readers may wonder if the huge volume of listings in 2022 is a trend in itself and likely to continue.

According to Rory Cunningham, senior manager of investment products for the ASX, there were a few reasons for the surge - and it’s not necessarily going to be as high in 2023.

“New admissions were driven by existing and new fund managers bringing strategies to market. All of the new managers last year were active managers. There’s growing demand, including in the retail space, for specialist strategies, particularly active and thematic strategies,” Cunningham said.

The biggest themes of 2022 by the listings

The stand-out theme for listings in 2022 related to climate change and the green transition.

In fact, 2022 saw a first for Asia-Pacific with the ASX-listings of 2 carbon allowance ETPs: the Global X Global Carbon ETF (ASX: GCO2) and the VanEck Global Carbon Credits ETF (ASX: XCO2). These ETFs have collectively drawn in just shy of $6m in assets under management despite only being launched in November and December last year.

Carbon trading is a growing space - and far more advanced in European markets. It is likely that ETFs focused on this space will continue to draw interest in coming years as Australian investors gain a deeper understanding of how such markets work.

The green transition was a particular standout as a thematic, with ETFs covering green metals, alternative forms of energy like solar and uranium and mining companies set to benefit from transition.

Some of the newly listed ETFs in this space generating the biggest inflows included the Global X Copper Miners ETF (ASX: WIRE) which totals over $37m in assets under management and the BetaShares Global Uranium ETF (ASX: URNM) which holds over $25m in assets under management.

Some other trends to pick up in 2022 included several listings on the fixed interest front - no doubt investors are keen to take advantage of potential returns from higher rates globally, while international equities listings continued to dominate. This is in keeping with previous years.

Surge in actively managed funds over the past few years

Actively managed funds are a fairly new addition to the ETP market in Australia, and there was a brief ban on new issues of them from ASIC in 2019. There has been a large volume come to market since then, off the back of demand for active strategies and, no doubt, the access to retail investors appeal to fund managers.

Given the news for crypto markets in 2022, between the fall of SFX and crashing Bitcoin prices, it might also surprise investors that there were two cryptocurrency funds launched on the ASX last year. 

These covered Bitcoin and Ethereum and have accumulated over $13m in funds under management. It’s a vast cry from what such funds might have been able to pull only a few years ago but still an interesting indicator that many investors maintain faith in these more established cryptocurrencies. There has been some recovery in prices in recent months too.

More to come in 2023

Given the continued global focus on green transition, it’s likely we will see more on this front in 2023 (if not issues, then flows to existing ETFs). More new listings from active managers are also expected to be on the cards this year.

It’s a growing space after all, and if you can dream it, an issuer can create it. 

You can download Global X ETFs The Australian ETF Landscape H1 2023 here.

This article was first published for Livewire Markets on Tuesday, 4 April.