Australian ETF industry surges past $300b milestone

Australia's exchange traded fund industry has surged past $300 billion in funds under management, a new record in a year full of them.

Australia's ETF industry had $309.3 billion in funds under management at the end of September, up $9.9 billion, or 3.3 per cent, from a month ago, Australian ETF issuer Betashares said in a report.

The Australian ETF industry has grown by $63 billion since the start of the year, thanks to investment growth and $37 billion in net inflows, Betashares said.

Betashares is now predicting the Australian industry could hit $320 billion by year-end and $500 billion by the end of 2028 - two years ahead of its previous forecast.

"We're witnessing a structural shift in how Australians invest, with ETFs increasingly becoming the vehicle of choice for building diversified portfolios," said Betashares chief executive Alex Vynokur.

ETFs are financial instruments that trade like shares on stock exchanges like the ASX, but offer exposure to a basket of underlying assets such as stock market indexes, commodities, cryptocurrencies or investment themes.

Mr Vynokur said that investors and financial advisers were embracing them because of their ease of access, transparency and cost-effectiveness.

Adrian Neiron, chief executive and managing director of VanEck Asia Pacific, said Australia's ETF industry was scaling at pace.

"It took 21 years to reach the first $100 billion in assets, a further three years to reach $200 billion, and only 15 months to reach $300 billion," he said.

VanEck predicts that the industry will grow at a 20 per cent compound annual growth for the next five years, surpassing $750 billion by 2030.

A Vanguard ETF that invests in 1,320 of the largest companies around the globe received the most inflows in September, at $257.2 million, VanEck said.

Close behind, with $246.4 million in net flows, was an iShares ETF that tracks the US S&P500 index.

Despite their strong growth, Betashares said that ETFs still represent around only six per cent of the broader managed fund industry in Australia, so there was significant headroom for further adoption.