Flying ETFs…a tenuous link

The month of August fills me full of joy every year as (a) it’s my birthday, (b) it’s the Summer in London (at least 1 week of Sun!) and (c) I don’t get on a plane to support our many ETF partners around the world.

Aeronautically speaking though, August is a notable month – way back in August 1783 we had the 1st hydrogen-filled balloon flight. Almost 150yrs later, August 1929 saw the 1st round the world airship flight by the Graf Zeppelin. After becoming the 1st woman to complete a solo transatlantic flight in May 1932, August 1932 saw Amelia Earhart also become the 1st woman to complete a flight across the US non-stop.

Now here comes the tenuous link – Amelia made her historic US flight in 1932 on August 24th, in 1937 in her fateful last attempt to circumnavigate the globe, the last continent Amelia took off from was Australia…..roll the clock forward to August 24th, 2001 and we witnessed the take-off of the Australian ETF market with the inception of the SPDR® S&P®/ASX 200 Fund, more commonly known by its’ ticker, STW.

If you think that’s a stretch, how about this – Amelia Earhart was heading towards Howland Island in the Central Pacific Ocean when she disappeared. Howland Island lies almost halfway between Australia and Hawaii and is an unincorporated unorganized territory of the United States………which is where the most commonly accepted 1st ETF, as we know them today, was launched, the SPDR® S&P 500® ETF, otherwise known as SPY.

STW is 15yrs old and is just over US$2.2bn which makes it roughly 16% of the US$14bn total Aussie ETF market. When SPY was the same age, it was around US$70bn and it made up approximately 10% of the then US$700bn US ET market. SPY is now 23yrs old and has SPY has recently touched US$200bn making it still ~10% of the US ETF market. However, more interesting is the fact that whilst SPY’s relative weight hasn’t changed, the market has trebled in size and SPY has grown along with it.

Now, if you look at the Aussie ETF market, it took nearly 11yrs for the 1st US$6bn to be raised but only a further 2yrs for it to double to US$12bn back in 2014 and is already up to US$14bn as at the end of Jul’16. Furthermore, the 10yr CAGR for the Aussie ETF market is 40.1% which is almost double that of the US figure of 21.2%.

Therefore, with the implementation of FOFA and the further embracing of ETFs by FA’s, Supers and Retail investors alike, one could argue that this is just the beginning for the ETF market in Australia – after all, it has been a 23yr Global “overnight success”.

Caveat Emptor – in the spirit of balance, August 24th 2015 was not a good day for the US ETF market (plenty of articles out there on this event) but the assets under management have increased by just over 10% a year later.

The posts on this blog are opinions, not advice. Please read our disclaimers.

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