SYDNEY, 27 August 2021: State Street Global Advisors, the asset management arm of State Street Corporation (NYSE: STT), today released investor research that shows young Australians are dominating ETF investing for the first time in the product’s 20-year history.
Commissioned ahead of the 20th anniversary of ETFs in Australia taking place this week, the State Street Global Advisors SPDR 20 Years of ETFs research shows that in 2021, Australian Millennials (aged between 25 and 39) and Gen Z (aged between 18 and 24) overtook Baby Boomers (aged 55 plus) and Gen X (aged between 40 and 54) as the dominant cohort of ETF investors – a trend accelerated by the coronavirus pandemic.
Of the new ETF investors in 2021, just under half (47%) were Millennials, 23% Gen X, and 25% Baby Boomers. Two decades ago, just 24% of new ETF investors were Millennials, while 45% were Gen X and 24% were Baby Boomers.
This demographic shift has coincided with record inflows into ETPs, with more than $36 billion invested in the last 12 months, pushing local growth for the investment vehicle higher than all other major financial markets, including North America and Europe.
Over the past 10 years, Australian ETPs have seen a Compound Annual Growth Rate (CAGR) of 28.4 per cent, compared to 17.4 per cent in North America and 15.1 per cent in Europe.
Head of SPDR ETF Asia Pacific Distribution Meaghan Victor said she expected young Australians to continue to drive that growth.
“Better financial education and improvements in technology have helped make ETFs more accessible to younger Australians. Millennials are the ETF generation of the 2020s.
“The Australian ETP market is now five times larger than it was just five years ago, with more than $116 billion in assets under management (AUM) and more than 200 ETPs for investors to choose from,”1 she said. “Even if CAGR slows to a more comparable rate of 25 per cent, like we have seen in Europe and the US, Australian ETP assets are still expected to grow from more than $110 billion to $226 billion in the next three years.2
“What we have seen during market crises is that ETF trading volumes have surged, highlighting that ETFs continue to function as originally intended — as buffers and sources of liquidity in stressed markets. And although there are more active ETFs to choose from than ever before, ETFs that track an index still dominate, with 82% of investors using this style,” she said.
The State Street Global Advisors SPDR 20 Years of ETFs quantitative online research took place between June and July 2021 among 2,163 Australian investors to assess their evolving drivers for using ETFs and investment intentions.
Closing the gender gap
The research also shows the ETF gender gap is closing. Back in 2001, fewer than one in 10 new ETF investors were women, compared to one in four (26%) today. And if recent adoption rates continue, women could be close to parity for ETF adoption in the next five years.
“Young women are the fastest growing cohort of ETF investors in Australia, showing that the gender investment gap may be closing. The trend is gathering pace, thanks to lower barriers to entry. It has never been easier for anyone to invest in an ETF.” ETFs were born out of the US stock market crash of 1987 as a tool for institutional investors to invest their cash reserves. They were introduced to Australia on 27 August 2001 with the launch of the SPDR® S&P®/ASX 200 Fund (STW) and SPDR® S&P®/ASX 50 Fund (SFY).
They have since become one of the most popular ways to invest.
Today, ETF investors have on average $170,000 invested in ETFs, ranking third after Australian shares ($235,000) and investment property ($205,000) but ahead of term deposits ($100,000), international shares ($90,000), and unlisted managed funds ($60,000). Cryptocurrency, commodities, and fixed income products are less popular with ETF investors with just $5,000, $15,000 and $50,000 invested in these products respectively. Further, 71% of ETF investors are SMSF Investors.3
Long-term ETF investors said ETFs were the best product to take advantage of market downturns (57% cite this), over international shares (7%) and Australian shares (10%).
In the past 12 months, ETF investors said they had vastly increased their portfolio allocation to the product. Millennials (+68%pts) when compared to Baby Boomers (+45%pts) were more likely to have implemented a net increase in their allocation to ETFs in their portfolio allocation as a result of the coronavirus pandemic.
Despite the growth in the size of the market, Australians are starting out with lower investment balances in ETFs than ever before. Today, those new to ETFs are investing half the amounts in their first year, an average of $62,0000, compared to Australians who started investing in ETFs in 2001 (an average of $125,000).3
Born out of crisis
ETFs have withstood numerous market shocks, including the crisis of September 11, 2001, the Global Financial Crisis, and the coronavirus pandemic.
“The COVID-19 pandemic has brought extreme challenges to markets across the globe, impacting liquidity across nearly all investment vehicles and asset classes,” Ms Victor said.
“Yet despite these challenges, ETFs have performed well, providing market participants with liquidity and price discovery when they need it most. Investors are particularly drawn to ETFs as a way to take advantage market downturns.
“Over the last two decades ETFs have proven to be one of the most disruptive forces to the way Australians can build wealth.”
One of the key attractions of investing in ETFs is the ‘instant diversification’ potential. Investors can buy exposure to all the biggest 200 Australian companies in one ETF via a single transaction, allowing them to spread their risk in a simple and cost-efficient way.
STW is one of the largest ETFs in Australia with more than $4.7 billion in AUM, representing 4% of total Australian ETPs AUM.4 It is the only ETF in Australia to have traded more than $50 billion.5 Since its launch, the fund has traded more than $56 billion, representing an average daily trading dollar volume of $11 million.5
“STW offers investors growth and income potential by investing in 200 of Australia’s largest and most liquid companies in a single trade. It continues to be a staple investment for institutions, financial advisers and retail investors alike,” Ms Victor said.
“If someone had invested $10,000 in STW every year since 2001 they would have $519,932, assuming all distributions from the funds were reinvested.”6
To reflect the growing demand for ethical investing, SPDR launched the SPDR® S&P®/ASX 200 ESG Fund (E200) – one of the lowest cost ESG ETFs available in the Australian market and importantly representing a similar risk/return profile to STW.
Figure 1: Australia leads global growth in the ETP market.
|1Yr CAGR||3Yr CAGR||5Yr CAGR||10Yr CAGR|
Source: State Street Global Advisors, Morningstar, as at 30 June 2021. This information is included for illustrative purposes only. Figures are as of date indicated and should not be relied upon as accurate thereafter.
About SPDR ETFs
State Street Global Advisors created the first US-listed ETF in 1993 and listed the first ETFs in Australia on 27 August 2001: the SPDR® S&P®/ASX 200 Fund (STW) and the SPDR® S&P®/ASX 50 Fund (SFY).
To launch the Australian ETF industry, State Street Global Advisors partnered with the Australian Securities Exchange (ASX), S&P Dow Jones Indices and State Street (Bank and Trust), the custodian of the Australian State Street SPDR ETFs. Today, State Street is the world's leading ETF Servicer.Since the 2001 entry of STW and SFY as the pioneering ETFs in Australia, the ETP market has grown to $116.50 billion.7
SPDR S&P/ASX 200 Fund (STW) is one of the largest ETFs in Australia with more than $4.7 billion in AUM, representing 4% of total Australian ETPs AUM.8
STW offers investors growth and income potential by investing in 200 of Australia’s largest and most liquid companies in a single trade. As such, it continues to be a staple investment for institutions, financial advisers and retail investors alike.
SPDR® S&P®/ASX 50 Fund (SFY) offers investors growth and income potential by investing in the 50 largest and most liquid companies in Australia. This group includes long-established companies such as the Big Four banks, BHP, Telstra, CSL, and other household names.
State Street Global Advisors currently has 17 ETFs in the Australian market.For more information on the SPDR ETF suite, please visit https://www.ssga.com/au/en_gb/individual/etfs/fund-finder.
About State Street Global Advisors
For four decades, State Street Global Advisors has served the world’s governments, institutions and financial advisors. With a rigorous, risk-aware approach built on research, analysis and market-tested experience, we build from a breadth of active and index strategies to create cost-effective solutions. As stewards, we help portfolio companies see that what is fair for people and sustainable for the planet can deliver long-term performance. And, as pioneers in index, ETF, and ESG investing, we are always inventing new ways to invest. As a result, we have become the world’s fourth-largest asset manager* with US $3.90 trillion^ under our care.
*Pensions & Investments Research Center, as of 12/31/20.
^This figure is presented as of June 30, 2021 and includes approximately $63.59 billion of assets with respect to SPDR products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated.
1 ASX Investment Products monthly update, July 2021.
2 Source: ASX, State Street Global Advisors as of 30 June 2021. The forecast growth is an estimate based on a CAGR of Australian ETP growth maintaining 25%p.a. over the period forecast. This information is included for illustrative purposes only. There is no guarantee that the estimates will be achieved.
3 State Street Global Advisors SPDR 20 Years of ETFs research. A quantitative online research took place between June and July 2021.
4 ASX Investment Products monthly update, July 2021.
5 Data from Bloomberg as of June 30, 2021.
6 Source: State Street Global Advisors as of 30 June 2021. Past Performance is not a reliable indicator of future results. This is based on $10,000 being invested on 30/9/2001, and 30 June for every subsequent year. Total returns are historical and include change in share value and reinvestment of dividends and capital gains, if any. Cumulative total returns are reported as of the period indicated. The performance contained herein is provided on a net of fees basis, before taxes but after management and transaction costs. Returns have been calculated assuming reinvestment of all distributions and is calculated in AUD.
7 ASX Investment Products monthly update, July 2021.
8 ASX Investment Products monthly update, July 2021.
Important Risk Information: Issued by State Street Global Advisors, Australia Services Limited (AFSL Number 274900, ABN 16 108 671 441) ("SSGA, ASL"). Registered office: Level 15, 420 George Street, Sydney, NSW 2000, Australia · Telephone: 612 9240-7600 · Web: www.ssga.com.
SSGA, ASL is the issuer of interests and the Responsible Entity for the ETFs which are Australian registered managed investment schemes quoted on the AQUA market of the ASX or listed on the ASX.
This material is general information only and does not take into account your individual objectives, financial situation or needs and you should consider whether it is appropriate for you. You should seek professional advice and consider the product disclosure document and target market determination, available at www.ssga.com/au, before deciding whether to acquire or continue to hold units in an ETF.
ETFs trade like stocks, are subject to investment risk, fluctuate in market value and may trade at prices above or below the ETF's net asset value. ETFs typically invest by sampling an index, holding a range of securities that, in the aggregate, approximates the full index in terms of key risk factors and other characteristics. This may cause the fund to experience tracking errors relative to performance of the index.
Investing involves risk including the risk of loss of principal.
Diversification does not ensure a profit or guarantee against loss.
SPDR and Standard & Poor's® S&P® indices are trademarks of Standard & Poor's Financial Services LLC and have been licensed for use by State Street Corporation. ASX®, a registered trademark of ASX Operations Pty Limited, has been licensed for use by SSGA, ASL. SPDR products are not sponsored, endorsed, sold or promoted by any of these entities and none of these entities bear any liability with respect to the ETFs or make any representation, warranty or condition regarding the advisability of buying, selling or holding units in the ETFs issued by SSGA, ASL.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA, ASL’s express written consent.
© 2021 State Street Corporation - All Rights Reserved
Expires 31 August 2023