In a year in where the S&P/ASX 200 Accumulation Index rose 17.23%^ amid a surge in Covid-19 case numbers and growing inflation pressures, we highlight some interesting trends in ASX investment products. They include:

• mFunds
  
• Listed Investment Companies/Listed Investment Trusts (LICs/LITs) 
• Exchange Traded Products (ETPs) 

Steady year for mFunds

Investors added more than $501 million into mFunds, more than doubling the yearly inflow in 2020. Total assets under management for mFunds are at an all-time high of $1.91 billion, up 37.7% since the beginning of the year. 

There were 13 new mFund admissions covering sectors such as global equities, domestic equities, infrastructure and global fixed income.

Global fixed-income mFunds lead flows ^

The ASX Investment Products Monthly Report for December 2021 showed the majority of new money heading into global fixed-income mFunds, which perhaps reflects investor appetite to diversify away from equities because of the surging Covid-19 case numbers.

Led by the PIMCO Global Bond Fund Wholesale Class (ASX: PMF03), investors added $233.98 million into global fixed-income mFunds, outpacing the $98.93 million into global equity mFunds and the $82.84 million into domestic equity mFunds. Given the growing uncertainty around Covid, ASX expects this trend to continue into 2022.

mFund yearly flows by asset class^

Source: ASX

mFund – top 10 net flows^

Source: ASX 

Steady year for LICs/LITs

As the Australian economy continues to battle the surge in Covid-19 cases, 2021 proved a better year than 2020 for the LIC/LIT sector as demand rose steadily. At 31 December 2021, the market capitalisation of the LIC/LIT sector was $56.10 billion, up 6.2% in 12 months.

Domestic equity LICs/LITs continue to be the largest asset class, representing 61.82% of the LIC/LIT market, followed by global equities and fixed income.

LICs/LITs – yearly asset-class breakdown^

Source: ASX 

Over the last 12 months, there were four new LIC/LIT listings compared to only one in 2020.  Although the number of LIC/LIT listings grew, there was also the delisting of 11 due to windups or restructures. ASX expects to see more LIC / LIT listings in 2022 as this sector regains momentum and investor confidence after a couple of quiet years.

Trading in domestic equity LICs/LITs popular among investors 

The value traded in LICs/LITs increased steadily in 2021 with the total value traded up 11.2% from the levels in 2020. 

Domestic equity LICs/LITs were the most popular traded asset class, followed by global equities and fixed-income LICs/LITs. 

The highest value traded LICs/LITs in 2021 were the Australian Found Investment Company (ASX: AFI), followed by the Magellan Global Fund (ASX: MGF), WAM Capital Limited (ASX: WAM), Argo Investments Limited (ASX: ARG) and L1 Long Short Fund Limited (ASX: LSF).

LICs/LITs – yearly trading activity asset class breakdown^

Source: ASX

Top 10 traded LICs/LITs^

Source: ASX 

Steady decline in number of LICs/LITs trading at a discount

The number of LICs/LITs trading at a discount at 30 November 2021 decreased slightly over the last 12 months.  At 30 November 2021, 75.8% of LICs/LITs were trading at a discount compared to 78.1% 12 months ago. 

ASX expects this trend to continue as more LICs/LITs trading at a significant discount to their NTA either wind up or are restructured.

LICs/LITs – premium/discount to NTA at 30 November 2021^

Source: ASX

Exchange Traded Products (ETP) continue to grow in popularity*

In 2021, investors added a record $22 billion into ETPs, breaking the yearly inflow record of 2020 by 17%. 

Funds under management for ETPs totalled $133.97 billion, up 41.9% since the beginning of the year. There were also 24 new ETP admissions, mainly covering active and thematic strategies.
 

International equity ETPs lead Inflows for eighth year*

For the eighth straight year, international equity ETPs were the most popular asset class among investors as investors continue to diversify their portfolios away from domestic equities.

Led by the Vanguard MSCI Index International Shares ETF (ASX: VGS), investors added $11.11 billion into international equity ETPs, more than doubling the $5.35 billion into domestic equity ETPs and outpacing the $2.22 billion into domestic fixed-income ETPs and $1.6 billion into mixed-asset ETPs. 

ASX expects this trend to continue as investors search for investment opportunities offshore to diversify their portfolios.

ETPs – yearly asset class breakdown^

Source: ASX

ETPs – top 10 net flows^

Source: ASX 

Thematic ETPs shine in 2021

Thematic investing stood out in 2021 as investors added to ETPs that provided exposure to structural changes that have the potential to reshape the world. In 2021, investors added $2.93 billion into thematic ETPs, more than doubling the previous yearly inflow record of 2020. 

ASX expects the popularity of thematic ETPs to continue into 2022 as investors become more confident in incorporating these ETPs into their portfolios.

ETPs – top 10 thematic net flows^

Source: ASX 

Notes:

* For the purposes of this article, the figures stated only include the quoted units on ASX relating to ETPs that use the dual entry/exit structure.

^ Source: ASX Investment Products Monthly Report (December 2021) & ASX CHESS data