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Australian ETF market poised to ‘smarten’
UBS Global Asset Management forecasts that the increasing popularity of ‘smart beta’ ETFs and the rising acceptance of these funds by SMSF and financial advisors will result in significant growth of these products in Australia this year.
UBS ETF Capability Manager, Stephen Small comments, “Smart beta ETFs currently make up approximately 10% of the Australian ETF market and we expect this to double by the end of the year.
“These funds have gained popularity as investors respond to the limitations of traditional market cap index funds in that they have a concentrated exposure to a small number of large cap companies and the individual sectors making up the largest portion of the index. The ‘smart beta’ approach avoids this by weighting portfolios based on factors other than the size of the underlying companies such as dividend yield, value factors or buy recommendations.
“This strong growth in smart beta ETFs, such as minimum volatility funds, has already commenced in other markets around the world, particularly in the US and Europe. For example, minimum volatility funds alone pulled in around $5.5 billion in 2012 globally. Smart beta is the natural evolution of ETFs and we believe that Australia, being likened to the Canadian market, which now sits at over $50 billion in total ETF FUM, can expect similar traction,” said Small.
UBS launched its own smart beta ETF in Australia, the UBS IQ Research Preferred Australian Share Fund (ASX code: ETF) in October 2012. The fund uniquely combines the cost and liquidity benefits of an Exchange Traded Fund with the insights and expertise of Australia’s number one equity research team*. Its selection criterion is based on a "buy recommendation" from the UBS research team, as apposed to simply selecting the largest stocks in the market.
Since launching the fund has impressively reached $127 million in funds under management. UBS intends to roll out similar funds this year across multiple asset classes.
Test Your Financial IQ
UBS Global Asset Management is offering $10,000 worth of units in its UBS IQ Research Preferred Australian Share Fund to the winner of a financial IQ quiz featuring ETFs which is set to close on 22 February 2013. Enter online via www.testfinancialiq.com
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UBS GLOBAL ASSET MANAGEMENT
UBS Global Asset Management is a large-scale asset manager with well-diversified businesses across regions, capabilities and distribution channels. It offers investment capabilities and investment styles across all major traditional and alternative asset classes. These include equity, fixed income, currency, hedge fund, real estate, infrastructure and private equity investment capabilities that can also be combined into multi-asset strategies. The Fund Services unit provides professional services including legal fund set-up, accounting and reporting for traditional investment funds and alternative funds.
Invested assets totalled AUD 610 billion at 31 December 2012. The firm is a leading fund house in Europe, the largest mutual fund manager in Switzerland1 and one of the largest fund of hedge funds and real estate investment managers in the world.
With around 3,800 employees, located in 24 countries, we are a truly global asset manager. Our principal offices are in London, Chicago, Frankfurt, Hartford, Hong Kong, New York, Paris, Singapore, Sydney, Tokyo and Zurich.
UBS IQ Research Preferred Australian Share Fund
For further information on the UBS IQ Research Preferred Australian Share Fund please visit http://www.ubs.com/au/en/asset_management/exchange-traded-funds.html