Investors attracted to ETFs

New Zealand investors have developed an appetite for exchange traded funds ETF), according to recent data from both the Australian and New Zealand stock exchanges.

Friday, January 19th 2007, 6:36AM

by David Chaplin

The New Zealand Stock Exchange (NZX) last week announced that funds under management in its five Smartshares ETFs had surpassed $500 million, which it said "bucks the trend" of outflows in other parts of the retail funds sector.

In the same week as State Street, which launched the first ETF in Australia five years ago, said New Zealand investors now account for 20% of trades in its streetTracks 200 Listed Property Trust and are "highly active" in other products.

Since listing the first ETF in Australia in 2001, a streetTracks share which mirrors the S&P/ASX 200 index, State Street said the products have received growing support from both institutional and retail investors.

Initially, the Australian streetTracks were used mainly by institutional clients to act like futures, however. Rob Goodlad, head of State Street in Australia, said retail investors are increasingly using the ETFs.

Goodlad said over the past year trading in the Australian ETFs has increased markedly combined with a large decrease in the average value of trades which indicated action by retail investors.

ETFs are baskets of securities usually based around indexes like the S&P/ASX 200 which have grown into a sophisticated and popular business in the US. Unlike active listed investment vehicles ETFs are designed to trade at the underlying asset value with no discount or premium. The products also typically feature low management fees.

In a statement Yvonne Davie, Smartshares head of sales and marketing, said the ETF products are popular because they offer investors the ability to save in a "simple, straightforward way and at a low cost"

"It is great to see Smartshares hit the $500 million funds under management mark and we believe this growth is set to continue with the new KiwiSaver scheme highlighting the importance of savings and investment in New Zealand," Davie said.

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