Investors Shift Focus to Hedged International Equity ETFs Amid Volatility

1

The recent data from the Australian Securities Exchange (ASX) highlights this trend, with net inflows into Australian equity ETFs rising by 59% from $1.04 billion in March to $1.701 billion in April. In contrast, global equity ETFs experienced a dramatic surge of 162%, with inflows growing from $750 million in March to $1.9 billion in April. This shift is further corroborated by insights from Betashares in their monthly Australian ETF industry analysis.

According to InvestSMART CEO Ron Hodge, the intensification in global equity ETF investment can be attributed to geopolitical events, namely the tariff announcements from the Trump administration, which have significantly impacted market conditions.

The ASX data indicates a consistent pattern where domestic equity ETF inflows remain lower than those of global equity ETFs, with March as an exception. Contrary to expectations, retail investors, faced with market instability due to the tariffs, opted for international over domestic markets, likely influenced by their financial advisors' guidance to rebalance portfolios after substantial foreign market adjustments.

A significant move towards hedged international equity ETFs is visible as investors seek to mitigate risk from ongoing currency volatility. InvestSMART points out that from March to April, BlackRock’s iShares S&P 500 ETF witnessed a net movement of $1 million into its hedged counterpart, the iShares S&P 500 (AUD Hedged) ETF.

This shift is attributed to currency market fluctuations observed in April, where the Australian dollar (AUD) oscillated between $US0.60 and $US0.64. Economists largely predict that the Australian dollar will strengthen against the US dollar in the coming years, further supporting the inclination towards hedged investments.

Given that Australian equity markets account for only 2% of global markets, diversification into international equities becomes imperative for Australian investors, as more global equity ETFs than Australia-only ETFs are available on the ASX.

While flows into standard ETFs continue to dominate the market, the increasing demand for hedging reflects growing investor awareness of the necessity to buffer against currency volatility. Despite this shift, the core preference for mainstream ETFs—domestic, global equity, and fixed income—appears enduring.

Published:Monday, 19th May 2025
Source: Paige Estritori

Share this news item:

Finance News

Clear

Global Central Banks Intensify Focus on Gold Reserves 18 Jun 2025: Paige Estritori Recent data from the 2025 Central Banks Gold Reserve Survey indicates a renewed focus on gold among the world's central banks. As these financial institutions adapt to the changing economic landscape, their strategies increasingly involve boosting their gold reserves. - read more

Navigating Private Credit Risks for Australian Retail Investors 17 Jun 2025: Paige Estritori Investment in private credit is not a contemporary innovation; its roots trace back to ancient times. The evolution of direct lending, particularly in the UK, Europe, and the US, intensified across the 18th to the 20th centuries, serving as a crucial alternative during frequent banking crises. The current surge in private lending originated in the 1990s amidst burgeoning internet startups, and was further propelled by tighter banking regulations and historically low interest rates post the Global Financial Crisis. - read more

AFCA Caught in Scam Operations, Urged to Strengthen Protocols 17 Jun 2025: Paige Estritori The Australian Financial Complaints Authority (AFCA) finds itself inadvertently entangled in sophisticated scamming operations. The Stockbrokers and Investment Advisers Association (SIAA) has identified a tactic whereby fraudsters use AFCA's complaint system to lend credibility to their scams by taking over victims' accounts and falsely lodging complaints. - read more

Sydney Property Market Rebounds with Strong Auction Performance 16 Jun 2025: Paige Estritori The Sydney property market showed signs of revival as the latest auction results indicated a resurgence in buyer enthusiasm. Last weekend, the city recorded a preliminary auction clearance rate of 70.5%, marking a notable rebound from the previous week's low of 58.1%. The recent performance also represents Sydney's first clearance rate above 70% in three weeks and only the second instance in the past thirteen weeks. - read more

Overseas Investors Target Australian Real Estate Debt 13 Jun 2025: Paige Estritori The Australian commercial real estate debt market is garnering attention from international investors, with the Canada Pension Plan Investment Board (CPP Investments) making significant inroads. In partnership with Nuveen, a global asset manager, a substantial investment strategy targeting Australian real estate debt has closed its second round. The total commitment exceeded $650 million, with CPP Investments contributing $300 million through their CPPIB Credit Investments Inc. - read more