Australian investors are pouring money into exchange-traded funds but they’re less interested in those exposed to domestic shares.
A record $7 billion was invested in ETF products in August, narrowly surpassing the $6.8 billion high water mark set in July to take the Australian ETF industry to $375.6 billion.
That’s growth of $44 billion since the start of 2026 and 37 per cent ahead of the industry’s growth for the same eight months in 2025.
“It’s been a cracker of a year,” VanEck Asia Pacific chief executive and managing director Arian Neiron told AAP.
ETFs are financial instruments that trade like shares while offering exposure to a basket of underlying assets – anything from stocks and bonds to commodities and cryptocurrencies.
They’ve been around in Australia since 2001 and have grown in popularity in the past seven or eight years.
More than half of the $7 billion in August inflows went offshore, with $3.9 billion going into ETFs devoted to global equities.
Vanguard’s MSCI Index International Shares ETF, which invests in 1300 companies in 23 developed countries, took in $491 million, while Betashares Global Shares ETF added $354.4 million.
“Investors are chasing AI picks, the shovel trade, US exceptionalism and the US earnings,” Mr Neiron said.
Only 17 per cent of August’s inflows – $1.2 billion – went into ETFs devoted to Australian shares.
ETFs stuffed with Australian shares represent 27 per cent of the local industry’s assets under management, and allocations have declined steeply in the past 12 months, according to VanEck.
This means the Australian share market is now competing for a share of wallet it used to receive by default.
Mr Neiron said investors were concerned about Australian corporations’ earnings growth.
“You look at the big banks, fully priced with the federal budget concern about housing, and we’re starting to see housing prices come off,” he said.
However, ETFs devoted to Australian bonds did well in August, taking in 14 per cent of the month’s flows.
Australian 10-year bonds this week hit a 15-year high of 5.37 per cent.
“When you compare that to Australian dividends, you look at the risk-reward trade; Australian equities valuations are a little bit expensive,” Mr Neiron said.
VanEck predicts Australia’s ETF industry to hit a whopping $400 billion by the end of the year.
By comparison, the country’s superannuation industry is valued at about $4.5 trillion.
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