State Street Global Advisers (SSgA) has expanded its suite of Australian exchange-traded funds (ETFs) from four to seven, predicting massive growth in the local ETF market over the next five years.
Based on historical ASX data and taking into account growth patterns seen in the US ETF market, SSgA predicted the Australian ETF market would grow from its current level of around $4.5 billion to more than $35 billion in 2015, according to SSgA’s senior managing director in Australia Rob Goodlad.
The manager is adding resources and a financials sector ETFs based on the S&P/ASX 200 Index, as well as a small cap ETF based on the S&P/ASX300 less the S&P/ASX100, with Product Disclosure Statements to be available by the end of this week.
The financials ETF will exclude Australian real estate investment trusts and is aimed at investors who want exposure to growth cycles and higher franking credits with stable dividends. The small cap ETF is aimed at investors who want a slightly higher risk and return opportunity, the firm stated.
SSgA’s president and director, global head of ETFs, Jim Ross, said while the retail market was growing SSgA wanted to target all investors.
The institutional channels in the US have aggressively taken on the use of ETFs in the last couple of years to get exposures to sectors or commodities including gold and emerging markets small cap equities, Ross said.
It is important to find the right balance for the market and to talk to investors to see what type of products they would like to see, although it’s not always possible to bring to market every product that investors would like to see, he said.
SSgA Australia senior product engineer Jonathan Shead said that when developing the new range of ETFs SSgA looked at what the key themes for the current market are and realised the three largest and most significant themes were a resources play; interest rate and banks; and small cap.
“The larger and more significant the theme, the more you attract liquidity, the more efficient an ETF is, the less likely you are to have a dud product five years down the track,” Shead said.
