Dimensional increases active ETF supply in slow Australian market

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Dimensional Fund Advisors has doubled its list of active exchange-traded funds in Australia, despite such products struggling to raise assets among local investors this year.

The US asset management giant’s new offerings, Australian Value Trust, Global Value Trust and Global Small Company Trust, also come nine months after it first entered the Australian ETF space with three active strategies.

As with the existing Australian Core Equity, Global Core Equity-Unhedged and Global Core Equity-AUD Hedged strategies, which were the provider’s first local ETFs to list in the country in November, the newest products have a “dual access” structure ” under which investors can access a fund through listed and unlisted distribution channels.

All ETFs also follow a systematic or factor-based approach to investing, which “avoids the restrictions of indexing through an active but process-based pursuit of higher expected returns,” according to a company statement.

This article was previously published by Ignites Asia, a title owned by FT Group.

“Our strategies offer the benefits of indexing – such as low costs, low turnover and high diversification – together with the advantages of flexible deployment that provides a continuous focus on higher expected returns,” Dimensional Australia chief executive Bhanu Singh said in – a statement.

Dimensional first came to Australia in 1994 and oversees more than A$1.1 billion ($745.2 billion) in assets globally, including more than $50 billion in Australia and New Zealand.

However, Dimensional’s newest launch comes as active Australian ETFs have seen minuscule inflows and asset growth this year, with a growing number of fund closures.

Such strategies have lagged significantly behind their index-tracking counterparts as issuers launch products that replicate unquoted funds already available in the market without properly considering fees and performance sustainability, according to Arian Neiron, CEO and managing director of US asset manager VanEck for Asia-Pacific. business.

The growing number of active fund closures, which have already hit global managers such as JPMorgan Asset Management and Fidelity International, will also continue apace, he told the publication.

“This paints a pretty bleak picture for active ETFs,” Neiron said, especially against the backdrop of the rapid growth of the broader local ETF industry.

More than half of all active ETFs in Australia, or 64 of the 119 strategies available, have less than $50 million under management, while about 20 such products “have not traded at all this year he said.

The 18 active ETFs listed this year so far have collectively attracted just 0.3% of the industry’s total net inflows year-to-date, worth just $36 million, with such strategies holding just 21% of the industry’s total funds under management , despite accounting for a third of Australia’s total ETF market.

Fidelity delisted its Fidelity Global Demographics fund from the local exchange in June, saying active ETF units represented only about $8.12 million, or just 7.3 percent of the fund’s total assets under management.

JPMAM has announced it will liquidate its $1.84 million JPMorgan Sustainable Infrastructure Active ETF (fund under management) this month.

*Ignites Asia is a news service published by FT Specialist for professionals working in the asset management industry. Trials and subscriptions are available at ignitesasia.com.