State Street signals ‘exponential’ ETF market | Australian Markets

New market analysis from State Avenue has indicated ‘exponential growth’ is on the horizon for the Australian exchange traded fund (ETF) industry, with 25 per cent growth anticipated this 12 months.

The ETF supplier’s evaluation indicated that the ETF market’s funds underneath management (FUM) would soar from AUD$240 billion to AUD$300 billion by the top of the 12 months, and web inflows might surpass AUD$50 billion.

It additionally suggests three world managers with over USD$100 billion in FUM are set to release their first product for Australian traders and the native market will see one new coin ETF launched this 12 months.

Nonetheless, Australia continued to observe within the footsteps of China and Taiwan in phrases of year-on-year growth, recording 26 per cent in 2024; China maintained its standing because the quickest growing ETF market with 75 per cent year-on-year growth, with Taiwan following at 54 per cent.

“The Australian ETF market continues to mature and investor adoption is higher, experiencing nearly 30 per cent CAGR over the last ten years,” State Avenue’s Head of ETF Options, APAC, Ahmed Ibrahim, stated.

“Final 12 months, the Australian ETF market loved robust inflows, particularly passive ETFs. There have been additionally a quantity of new entrants into the lively ETF space and that pattern seems to proceed in 2025, the place massive investment managers who’ve predominantly run unlisted methods are adopting the twin entry model or opening an ETF share class.

“All through 2025, we consider the growth momentum of the Australian ETF market will proceed, primarily pushed by client demand for fixed income ETFs, product innovation, demand for digital belongings ETFs and the continued discount of management charges by ETF issuers which makes investing into ETFs more engaging.

“Of the 10.7 million investors in Australia, approximately 2 million now hold ETFs in their portfolio. ETF investors tend to be younger. However, we are also seeing more sophisticated investors and financial advisors also reap the benefits of ETFs. A growing proportion of high-net-worth individuals are allocating to ETFs via self-managed super funds.”

The evaluation additionally highlighted robust growth throughout the APAC area particularly with 47 per cent, of which 45 per cent accounted for inflows. Regardless of lively managers struggling by means of difficult market situations in Australia just lately, State Avenue discovered that 78 per cent of the 934 new ETFs on the North American market have been offered as lively methods.

“In the US, we expect active ETFs to collect more than 30 per cent of all North American inflows and eclipse the total AUM of USD$1 trillion by the end of Q1,” Frank Koudelka, International Head of ETF Options at State Avenue, stated.

“We predict actively managed ETFs can have the upper proportion of general launches in Europe, growing to 4 per cent of AUM and 10 per cent of flows.

“Across APAC, growing demand in South Korea will continue to drive the ETF market and see active products make up more than 33 per cent of its total ETF market. We expect that as global issuers continue to APAC and have more focus on distribution, we will see actively managed ETFs rebound at large.”