One of the unique attributes of Exchange Traded Funds (ETFs) and one which they share with managed funds, is their ability to create new units. This means that theoretically there is no limit to the size that an ETF can get to.

Below we have a look at which ETFs had the highest net inflows last financial year to see where investors have been placing their money. In what has become a year on year trend, the segment added over 30% in assets to close the financial year at $38.87 billion in size.

The 30% growth came as a combination of both capital growth and fund flows, with $7.38 billion in new inflows, up from $5.2 billion last financial year. Below we take a look at where the $7.38 billion came from and share some insights.

Vanguard back on top

Last year we saw Vanguard’s Australian Share Fund (VAS) ranked 5th in total flows, taking $243m in new flows. This year Vanguard’s Australian Shares Fund is back on top, taking $663m in flows. Vanguard actually took 4 of the top 5 positions, cementing their position as the most popular ETF provider in Australia.

More institutional activity

Interestingly, the largest ETF by market capitalisation, the SPDR S&P/ASX 200 Fund (STW), whilst last year taking $295m in flows, this year actually had a small ($8m) outflow. With a large outflow in one month, we suspect this was a institutional investor redeeming funds. Part of VAS’ high flows can also likely be explained by an institutional investor, with almost half of their total inflows coming in one month. The iShares S&P/ASX 200 ETF (IOZ) also saw a large institutional inflow in one month. Institutional investors dominate ETF trades in the more mature US and UK ETF markets, we think this is great, as it helps provide more liquidity in the market for us retail investors.

A shift to global equities

This year was the first year that inflows to global equity funds exceeded Australian equity funds. There’s likely a couple of reasons for this; one being ETFs being a convenient way to access global equities strategies, the other being continued strong performance in global markets enticing investors to invest offshore.

Index investing dominates but Smart Beta and Active Manages strategies growing

ETFs were first introduced as cost effective ways for investors to access market indexes. This approach still dominates, with 72% of all flows to ETFs going to index tracking ETFs. In fact, 7 of the top 10 funds by flow are index tracking ETFs. However, with Smart Beta and Actively Managed ETFs accounting for 17% and 11% respectively, it is clear that a growing amount of investors are using Exchange Traded Products to access these types of investments.

Fund manager behemoth Platinum joined the top 10 of inflows with their Platinum International Fund (PIXX) an ETF version of their popular managed fund. Only launched in September 2017, it had $235m in flows in the financial year.

Vanguard’s popular high yield strategy (VHY), which we wrote about earlier this year also landed in the top 10, as did Vaneck’s Equal Weight ETF (MVW), who offer an alternative to investors wanting avoid the high concentration at the top end of the Australian share market.

80/20 rule still applies

As per last year, over 80% of all inflows to ETFs can be attributed to the top 20% of funds by inflow, with 81% of flows going to these funds. 64, or 36% of ETFs finished the year with total funds of more than $100m.

Below we list the inflows to all the ETFs on the ASX in the last Financial Year.