Dimensional boosts active ETF offering in slow Australian market

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Dimensional Fund Advisors has doubled its roster 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 feature a “dual-access” structure under which investors can access a fund through listed and unlisted distribution channels.

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

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

“Our strategies offer the benefits of indexing — such as low costs, low turnover, and high diversification — paired with the advantages of flexible implementation that provide a continuous focus on higher expected returns,” Dimensional Australia’s chief executive Bhanu Singh said in a statement.

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

Dimensional’s newest rollout, however, comes as active ETFs in Australia have seen minuscule flows and asset growth this year, with an increasing number of fund closures.

Such strategies have significantly lagged behind their index-tracking counterparts as issuers roll out products that replicate unlisted 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’s Asia-Pacific business.

The growing number of active fund closures, which has already affected global managers such as JPMorgan Asset Management and Fidelity International, were also predicted to continue apace, he told the publication.

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

Over half of all active ETFs in Australia, or 64 out of the 119 strategies available, have less than A$50mn in funds under management, while around 20 such products “have not traded at all this year”, he said.

The 18 active ETFs listed this year so far have collectively pulled in just 0.3 per cent of total industry net flows year to date, amounting to just A$36mn, with such strategies holding just 21 per cent of total industry funds under management despite accounting for one-third of the total Australian ETF market.

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

JPMAM announced it was set to dissolve the A$1.84mn JPMorgan Sustainable Infrastructure Active ETF (Managed Fund) 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.