ETP market shift a win for investors

Published on
January 30, 2020
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ETP market shift a win for investors

The Australian Exchange Traded Products (ETP) market capped off a watershed 2019 with a record quarter of net flows equating to $4.8 billion. The massive inflow saw the 12 month market growth exceed 50% with the total size of the ETP market now in excess of $61 billion.

In the same 12 months, 21 new products were launched by ninedifferent providers.

The insights revealed by RainmakerInformation are "certainly a win for investors",according to Rainmaker head of investment research, John Dyall.

"The traditionally concentrated market has seen a shiftin recent years with over one fifth of all products having onlybeen introduced in the last 24 months."

Of the 21 products launched since December 2018, Internationalequities - the fastest growing asset class saw eight new productsenter the space. Fixed interest, multi-asset and Australianequities asset classes each saw four new product introduced.

"It is commonly accepted that competition is a good thingin a market. A highly concentrated market means that consumers haveless choice and may be paying too much for the productoffered." Said Dyall.

"ETPs which provide exposure to multiple securities orindexes offer a great alternative within investor'sportfolios. Providers in the space are capitalising on theexcitement."

The dynamic market is seeing a changing of the guard. In 2012the two largest managers by FUM, BlackRock and State Street,controlled just over 68% of total investmentin the market. In 2019 the market share of the same providers hassince dropped to 35.6%.

ETP manager market share by FUM

In the same time, the number of providers operating in the spaceexpanded from just eight at end December 2012 to 26 providers atend December 2019, that offer 209 products.

Rainmaker analysis, using the Herfindahl-Hirschman Index, apopular metric exploring market share division within a market andindicative of the concentration and competitiveness market confirmsthis shift.

Analysing market share based on FUM, the market has moved frombeing highly concentrated in 2012 to being of moderateconcentration in 2019. Yet, assessing market share based on feerevenue of the 26 providers, the market becomes diluted and highlycompetitive.

Herfindahl Hirschmann index, Manager market share by revenue
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