Australian Shares (Broad Market)
Australian share ETFs had a relatively low average return of 2.1% after fees for the year including a 4-5% dividend yield.
Market-cap based ETFs fared better than smart beta and active ETFs with a 5.5% average return and the three top performers.
Smart beta ETFs returned 1.9% and active ETFs -1.8%.
Funds invested in small cap companies out-performed large cap funds across the three groupings of ETFs, while growth focused shares beat high-dividend paying companies.
Australian Shares (Sectors)
The average return of 3.4% was the fifth highest across ETF groups, ahead of Australian share and fixed income ETFs. This group’s average returns are affected by the wide range of returns, with a 26% difference between the best and worst performers.
The resources sector has grown less rapidly after exceptionalperformances of up to 40% last year, but has provided highreturns ranging from 17% to 19% and is the only sector with allpositive inflows since November 2017.
The financial sector ETFs all had negative returns clustered around -7%.
Global Shares (Broad Market)
Global shares had the highest average return of all groups with 12.8%. This group had the third fastest rate of FUM growth of 45% after global share sector ETFs and fixed income ETFs. With the greatest amount of FUM growth, more than double that of the next group, it managed to overtake Australian share ETFs to become the largest overall group of ETFs.
Global Shares (Sectors)
The average returns of 3.8% for global sector ETFs was the fourth highest, ahead of Australian shares, Australian sector and fixed income ETFs. It had the highest growth of FUM at 66% and the $660 million increase in FUM was the fourth largest amount across all groups.
As sector ETFs focus on specific industries, a wide range of returns from 17% to -10% is not surprising.
Fixed Income & Cash
This group offers exposure to fixed income and cash products from Australia and overseas. They are an important building block of a balanced investment portfolio, providing a cushion against the volatility of share market ETFs.
Fixed income and cash ETFs had the second lowest average returns over the year of 2.8%. This group has the third highest distributions with a 2.7% average, behind Australian shares and Australian sector ETFs. It also had the second fastest FUM growth of 47%, behind global share ETFs, to retain its place as the third largest group by FUM and has the lowest average fee for all groups.
This group had little variance in performance amongst the ETFs, with all returns ranging from 1.9% to 4.1%. This is unsurprising as all products are driven largely by Australian and global interest rates and credit spreads.
These ETFs cover the natural resources and commodity sectors. The Structured Products, or synthetic ETFs hold financial contracts rather than owning the physical underlying assets. This is usually for commodities such as oil and agricultural products, which mainly have value in their use and in large quantities. Physically backed ETFs oﬀer the most direct approach, but incur the cost of storage and insurance. This is the most common approach for gold products and some other precious metals, with procedures for storing gold bars being well established over time.
Commodity ETFs had the second highest average returns with 4.8% behind global shares. Their 14% growth rate of FUM was the second lowest and it remained the second smallest group ahead of currency ETFs.