The Australian ETF market — where it is now and where it's going

A decade of extraordinary growth

At the end of 2013, total Australian ETF assets under management sat at roughly $8 billion. By early 2024, that figure had crossed $200 billion. That's a 25-fold increase in ten years, driven by a combination of falling fees, growing financial literacy, the rise of low-cost online brokers, and a prolonged period of strong equity returns.

The pace of new ETF listings has also accelerated. The ASX and Cboe Australia now list over 350 ETFs and exchange-traded products between them, covering everything from broad index funds to niche thematic plays, infrastructure assets, fixed income, and currency-hedged international exposure.

What drove the retail investing boom

Several forces converged around 2019 to 2021 that brought a new generation of investors into ETFs specifically.

Low-cost brokers. The arrival of Stake, Superhero, and the zero-brokerage model pushed down the cost of each trade significantly. When a $500 investment no longer carried a $20 brokerage fee, regular small contributions became viable in a way they hadn't been before.

COVID-era participation. Market volatility during 2020 drew a wave of first-time investors who might otherwise never have opened a brokerage account. Many of them started with broad ETFs rather than individual stocks, partly because the product was simpler and the risk more intuitive.

Superannuation awareness. Growing scrutiny of high-fee super funds, accelerated by the Royal Commission into misconduct in financial services, pushed Australians to pay more attention to investment fees generally. ETFs became a natural reference point for what low-cost investing could look like.

Social media and financial communities. Online communities centred on ETF investing grew substantially during this period. Platforms like Reddit's r/AusFinance became places where hundreds of thousands of Australians shared portfolio strategies, most of which were built around a small number of core ETFs.

The ASX vs Cboe split

Until 2022, the ASX was the only game in town for ETF listings in Australia. Cboe Australia (formerly Chi-X) began attracting ETF issuers as a second exchange, and now lists a meaningful portion of the market. For investors, the practical difference is minimal: most brokers route orders to whichever venue has the best liquidity, and the same ETF can sometimes be listed on both.

For issuers, competition between the two exchanges has pushed down listing costs and created incentives to launch new products. That's generally good for investors, as it has contributed to lower MERs on new fund launches.

Where the assets actually sit

Despite the large number of ETF listings, assets are heavily concentrated in a small number of funds. The top 10 ETFs by AUM account for a disproportionate share of the total market. Vanguard's Australian Shares ETF (VAS) and its Global ex-Australia fund (VGS) are consistently among the largest, as are iShares' S&P 500 ETF (IVV) and BetaShares' Nasdaq 100 ETF (NDQ).

This concentration isn't unique to Australia. In the US, three ETFs (SPY, IVV, VOO) hold a combined $1.5+ trillion. Investors tend to converge on the most liquid, lowest-cost options for core holdings, and network effects reinforce the dominance of the largest funds.

The role of model portfolios and financial advisers

A significant and growing portion of ETF flows comes through financial advisers who construct model portfolios using ETFs as building blocks. The shift from commission-based advice (banned under FOFA reforms in 2012) to fee-for-service models created an incentive for advisers to minimise product costs, since they were no longer earning trailing commissions from expensive managed funds.

ETFs fit naturally into this environment. An adviser charging a flat annual fee has every reason to use the lowest-cost vehicles available. This has brought institutional-scale flows into retail ETF products and contributed meaningfully to AUM growth beyond the direct retail investor base.

The superannuation connection

Australia's compulsory superannuation system, which manages over $3.5 trillion in retirement savings, has been slower to adopt ETFs than the retail market. Most Australians hold their super in pooled trustee funds that invest in wholesale versions of the same underlying assets, not listed ETFs.

The growth of self-managed super funds (SMSFs) is the main exception. There are approximately 620,000 SMSFs in Australia, and ETFs are one of the most common asset classes held within them. As SMSF balances have grown and member sophistication has increased, ETF adoption within this segment has been strong.

Structural tailwinds that remain in place

The conditions that drove the first decade of growth haven't reversed. Fee compression continues: several providers have cut MERs in response to competition, and new low-cost entrants (like Betashares' A200 and Global X's BGBL) have forced incumbents to respond. The financial advice reform environment still favours transparent, low-cost products. Superannuation balances are growing, and SMSF numbers with them.

Demographics also matter. Australians in their 20s and 30s who started investing during the 2020 boom are accumulating assets and will continue contributing for decades. Most of them built their initial portfolios around ETFs and are unlikely to change that approach.