International sector ETFs gain popularity


By Kristen Crawford

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International equity exchange-traded funds (ETF) had overtaken Australian equity ETFs as the predominant products in the ETF asset class, with $6.9 billion in funds under management (FUM), up 95 per cent over the 12 months to June, according to a new report.

Stockspot’s “2015 Australian ETF report”, released today, found average international ETF returns were up 28 per cent over the year. International sector ETFs experienced even better returns, with an average performance of 36 per cent.

Meanwhile, the data showed 13 of the 17 new ETFs for the year were also international share ETFs, Stockspot chief executive Chris Brycki said.

“The majority of additional funds under management and new ETF issuances have been international share focused, which shows that investors tend to gravitate towards themes that have performed well in the recent past,” Brycki said.

“Over five years, the average international share ETF returned 11.4 per cent, compared to an 8.3 per cent return from the average Australian share ETF.

“Australian investors have been underweight in international shares for many years, so strong recent returns overseas have been a wake-up call for many of these investors with little to no international exposure.”

He warned, however, that investors should not get too carried away by the strength of overseas markets.

“Chasing ETFs that have performed well in the recent past is dangerous because assets which have performed well over the short or medium term tend to revert to their long-term average returns eventually,” he said.

“Investors that chase popular themes are likely to be disappointed when the investments don’t do as well in the longer term.”

Meanwhile, Van Eck Global announced the Market Vectors Small Cap Dividend Payers ETF had jumped to more than $25 million in its first few days of trading following buying for their managed accounts by specialist ETF strategist Implemented Portfolios.

Further, K2 Asset Management flagged the launch of the exchange-traded K2 Global Equities Fund. It said it had applied to the ASX to have the new fund admitted to trading status on the market.

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