Cboe increasing ETF competition in Australia

Published on
April 29, 2022
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Cboe increasing ETF competition in Australia

The purchase of Chi-X Asia Pacific by Cboe Global Markets in the middle of 2021 accelerated the competition for Exchange Traded Funds (ETFs) business in Australia.

The ASX still has the vast majority of existing new ETF business, but Cboe is already making inroads, having increased its market share of funds under management (FUM) from 0.6% to 3.1% in the year to the end of December 2021.

"The benefit of this competition is to provide different price points for managers seeking to launch new products," said John Dyall, head of investment research at Rainmaker Information.

"As a result, we can expect to see an acceleration of new ETF products, particularly in the active managed funds space."
"The increase in competition will likely lead to more competitive platform pricing and fees for product manufacturers. Whether this translates through to cheaper fees for investors is another story."

One of the largest sectors of unit trusts, actively managed equities funds, are in decline, having suffered an estimated $34 billion decrease through net flows in the past five years.

Net flows: active equities unit trusts 2017 to 2021

This decrease has been hidden because of the strong returns in Australian and international equities, resulting in a 38% increase in FUM, which has provided some breathing space for the sector.

At the same time, the Australian ETF market is experiencing impressive growth. In the three years to the end of 2021, it has grown by 50% p.a. and the total FUM has increased by 240%.

"The entrance of Cboe in 2021 appears to have accelerated the number of active funds available to ETF investors."
In 2021 the ASX listed 17 new ETFs for a net percentage increase of 8%. Cboe on the other hand, launched seven new products for a net increase of 58%.

"Cboe has a significantly greater proportion of active funds compared with the ASX listings," said Dyall.

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