Tech leads ETF market growth as energy transition trails

The news: The Australian ETF market grew to $177.6 billion in the year to December 2023 with technology ETFs recording the best performance, and energy transition and clean energy ETFs the worst, according to a Global X report.

The numbers: The market increased 33% over the year across 346 products, with $15 billion of net inflows. The best performing ETF was Betashares Crypto Innovators ETF, which returned 214.5% over the year. The worst performing was Global X Ultra Short Nasdaq Hedge Fund with a loss of 64%.

The context: The asset class growth was driven by positive market movements and numerous unlisted active funds converting into active ETFs. The technology sector gains were driven by mega-tech growth thanks to rapid AI innovation and a promising economic outlook despite a potential recession. Cryptocurrency markets rebounded as Bitcoin and Ethereum regained ground from losses in 2022. Higher interest rates, which impacted borrowing costs, hampered the energy transition and clean energy sectors given their long project timelines and higher reliance on debt. Global X noted palladium experienced a further decline as a result of the ongoing rise of electric vehicles.