Why investors are allocating more capital to ETFs

To wrap up today's session, I'm excited to introduce Mark Joken, Product and Investment Strategist at GlobalEx ETFs Australia.

Mark's deep knowledge in investment research and ETF analysis will provide us with valuable insights on why investors are allocating more capital to ETFs.

Welcome, Mark.

Thanks, Angelina, for having me.

It's great to be here.

So for today's session, I'm really excited to take everyone through a topic that I'm very passionate about, which is ETFs, but more importantly, why investors are allocating more money to ETFs.

It's a growing industry and I believe one that will continue to grow for many decades to come.

So yeah, I'm really excited to go through with it today for all of you tuning in.

Just a first thing, we've got our mandatory disclaimer.

So anything I do say is general in nature.

If you want any information about the particular products or anything in particular, I haven't taken into account your financial circumstances, but please jump onto our website to view the relevant disclosures.

A little bit about GlobalEx for those who aren't familiar.

So as Angelina said, my name is Mark Jochen, and I'm a product and investment strategist here at GlobalEx ETFs.

And we're a leading ETF issuer here in Australia.

But we have a global presence across the world, whether you're looking at North America, Asia, parts of Europe.

And we are owned by a Korean asset manager named Mirae Asset Management, who has more than half a trillion dollars in assets under management, a real powerhouse when it comes to investment management capabilities.

And we've got ETFs across the broad product landscape, both here and overseas.

You can see we've got over $80 billion across our 400 ETFs.

But more locally, a lot may be familiar with the GlobalEx ETF range.

We've got about $8 billion in assets under management across about 40 strategies we have here.

But I'm really excited not to talk about specific products in general, but more around the broader ETF landscape as a whole.

And I think it's important to start, when we talk about why more money is coming into ETFs, a lot of people are using the stock market as a way to create shareholder wealth.

The thing is, a lot of investors want that next 10-bagger.

They want the next stock that goes up 10 times.

We get drawn to attractions of headlines that say five stocks for 2024, 2025.

But if you have a look at the hard evidence, it shows that the vast majority of stocks actually underperform a broader benchmark like an index.

In fact, if you look globally, there's only a handful of companies that have created the majority of shareholder wealth over the last century, about four to six percent globally.

And this is because the share market is a very right-tailed event.

And what that means is you can see the chart on your screen, there's only a handful of companies that are driving the entire share market return.

In Australia, it's only around about 7% of companies that have done so over the last 20 years.

Whereas the average stock, which is the light blue line, has actually underperformed the broader market overall.

And that's a bit of an indicator to investors to say, well, why do I wanna actually pick

particular stocks in general where I can just get a basket of stocks in general.

As John Bogle, who was one of the early pioneers in index funds said, instead of trying to find the needle in the haystack, you can just buy the haystack.

And that's the great thing about indexing and proliferation of ETFs to encompass indexing based strategies really makes it accessible for investors to get access to some of these markets because stock picking is a very hard game.

And here are some very harsh statistics that I think a lot of people aren't familiar with.

But those four to 6% of companies that I mentioned, they are constantly changing.

So you as an investor need to know, well, how am I going to be able to pick those 46% every year or every decade if they are changing?

And some harsh statistics against stock picking in general is that 40% of stocks occur what's incurred a catastrophic loss, which means a loss of 70% or more and never recovers back to even.

And that's because stock picking is actually a loser's game rather than investing in indexing, which you're just gonna naturally own the winners.

Not just that, but actually more than half of the stocks, 58% in fact, have actually lost money for shareholders.

So everyone talks about investing being a great way to earn more money than you can in your bank account.

But the arithmetic of the share market is most of the actual stocks have negative capital returns.

And not just that, similar to the chart that I have in the previous screen, the vast majority of shares, in fact, in fact, two thirds of companies out there underperform a broader benchmark, like an index fund, as an example.

So we're always talking about how we can beat our neighbours, how we can outperform

but sometimes being average or getting the average market return actually might be an investor's best interest overall.

And that's where we've kind of seen the flock of money that's coming into ETFs, because a lot of ETFs track broad index funds.

There are some active ETFs, and we'll get to that later in the presentation, but the vast majority is around index-based ETFs.

And you can see that in the Australian market, we have experienced extraordinary growth within ETFs.

There are currently almost 400 products, so quite a big supermarket of them.

And the industry has crossed over $200 billion

What I find quite fascinating is it took about 20 years for the Australian ETF market to reach the first 100 billion and then the next 100 billion was achieved in three years.

So you're experiencing this almost like a hockey stick in terms of this exponential growth.

And overall, what you're seeing in terms of where money is going into ETFs and how the broader ETF market is looking.

Back about 20 years ago, when the first ETF came to market, it was predominantly Australian shares and commodities.

So GlobalX, we were the first issue of the first ever gold ETP product globally.

And that was a great access point for investors to get to commodities.

But you can see from the chart on the right hand side of your screen is that global shares, which is that orange area and also fixed income, they've slowly, which is the light blue area, have slowly gained market share within the Australian ETF total asset base.

And that's because Aussie investors in particular are using ETFs to access broad global markets, whether it be developed markets or emerging markets.

and also fixed income as a whole, which was once quite cumbersome to access, but ETFs have made it that much easier and that much more accessible to investors.

So overall, the Australian ETF market's growing at a rate of around about 30 to 40% per year, if you look from an annualized basis over the longterm.

And we are growing at a faster rate compared to our other global peers, like in Europe or the US.

Now the US is a little bit more mature, that being said.

They are probably about 10 to 15 years ahead of us.

So there's kind of a good trajectory of where we're gonna be over those next 10 to 15 years.

And if we just stay at our current rate of growth,

the ETF industry could be worth a trillion dollars by the time we get to 2030.

So there's so much tailwinds behind this growing industry.

And overall, the penetration within the Australian ETF market is still very low, which is why I'm particularly so bullish around ETFs taking up a greater share of the total wealth that's managed within Australia.

Because the chart on the right hand side of your screen shows

that the ETF market only accounts for less than 5% of the total funds managed in Australia.

You're talking about trillions of dollars sloshing around in unlisted managed funds or actively managed funds and I think ETFs are going to penetrate it a little bit more over time.

If you look at the US, they're closer to about 20 to 25% because that shows that just from a penetration point alone, the ETF market is continued to grow as more money comes into the product and as the product innovation keeps coming alive as well, which we'll dive into a little bit later.

So a lot of you may be familiar with ETFs, but just at a very high level when talking about some of the key benefits and why it's important for ETFs to be considered as core building blocks in your portfolio.

There's a few main reasons why ETFs are sought out.

The first is around diversification.

So getting access to a broad range of securities, broad range of share markets, and you're not experiencing that concentration risk.

So that's around the diversification piece because diversification really is the only free lunch when it comes to investing.

Secondly is around lower cost.

So I mentioned a lot of money still going into active funds and unlisted funds.

They tend to be more expensive from a management fee perspective, but also when you're transacting, the spreads on ETFs are a lot tighter and they traditionally are index-based strategies, so their management fee is lower.

Then you've got the liquidity aspect.

So because ETFs are open ended vehicles, they trade on the share market, you can get in and out whenever you need to during normal share market operations.

And also if you want to sell, there's no real redemption periods, you can just sell like any other share and get your money based on the normal settlement times based on the share market.

I've talked about access before, but also not just from accessing companies, but also just the minimum amount needed to get invested in an ETF.

Traditionally, if you wanted to go to an unlisted fund, you may have to invest 20, 25, 50,000, some even $100,000 to get started.

With an ETF, it's as little as $500 if you wanna buy it based on a HIN registry or some share trading platforms, even offering fractional based investing.

So you can get invested for less than $500 too.

Then there's the tax efficiency piece, and we'll get to that a little bit later in terms of why a lot of money is coming into ETFs.

But ETFs generally have less tax consequences than a lot of other unlisted funds or traditional managed funds, given the in-kind creation and redemption process through market makers and because there's less turnover in the portfolio.

And finally is around portfolio management.

So ETFs can be used as a core building block in your portfolios, really around rebalancing.

So when share markets fall and you may wanna be buying more and selling something that went up, ETFs are a great tool for investors because they're liquid and because they're transparent to move in and out to align with your long-term asset allocation.

I believe one of the biggest reasons why capital is floating to ETFs is because of not necessarily this migration from active to passive, but really a migration from high cost to low cost.

As Aussie investors, we love a bargain, but we also love controlling for fees.

And whilst investing is one of the areas in your life where the more you do, or generally the more you pay, investing is quite different because the less you pay, the more money that you get in your back pocket because fees are like termites.

They nibble at your returns every day, and that's what happens even in an ETF.

Every day, a little bit of the management fee comes out of the net asset value of the ETF.

And you can see that most of the money going into ETFs is into low-cost ETFs.

So we're talking about ETFs charging 0.25% per year or less.

About three quarters of the money that is going into ETFs is going into this fee tier.

There still is a bit of money going into the ones charging between 0.25% and 0.49%.

But if you direct your chart to the right hand side of that bar chart, you can see that the funds that are charging over 1%, right?

So even though it's an ETF, still a lot of money isn't going into expensive ETFs.

And I think that's really telling into why a lot of money continues to go into ETFs is because ETFs are synonymous with low cost investing, but not every ETF is a low cost investing tool.

So the vast amount of money is going into these low cost funds.

And that's, I think, because a lot of people are using the core of their portfolio for these low cost ETFs and using fringes on the side around their satellites exposure to get access to hot sauce or like exciting spicy areas, whether it be active management and thematics.

But the bulk is going into low cost ETFs, even though, and the chart on your right hand screen shows that the average fee did go up a little bit for ETFs overall.

But that's because a lot of money is coming into ETFs from low-cost investing.

But there's been a rise of active ETFs coming to market, which has pushed the average fee higher overall.

That being said, I see consistent compression within the ETF industry as more money goes into low-cost ETFs overall.

I mentioned before around the tax advantages around ETFs.

So the chart on your left hand side shows what percent of funds, and this is a great study done by Morningstar, whether it be in a traditional managed fund, like a mutual fund or an ETF, what percent of those funds actually incurred a capital gains distribution.

So when you're as part of a unit trust holder, you get all the dividends, the interest, all the particular components of the dividends within the companies.

but also that the capital gains are quite important.

And you can see that the vast majority of mutual funds incurred a capital gains event.

And I think that's very important for investors because not only do you wanna control for fees, but also for transaction costs and after tax returns.

The more that you're transacting, the more you're buying and selling, the more you're crystallizing capital gains and losses, and that could potentially impact your after tax return.

So I think it's really important that when

investors look at which vehicle they want to look at investing ETFs have superior tax efficiency compared to traditional managed funds.

And that's for two main reasons.

The first is like I mentioned before ETFs generally track an index.

So because there's not a lot of active management and a lot of not a lot of buying and selling ETFs traditionally index based ETFs have what's called lower portfolio turnover.

So less turnover in the portfolio generally generally means less capital gains tax for all the unit holders.

But the biggest reason is around the creation and redemption process.

This is because ETFs are open ended vehicle and they've got authorised participants and market makers.

who are constantly creating or redeeming new units based on underlying demand.

So when you're in a traditional managed fund, let's say you wanted to withdraw your money and sell out, there would be a capital gains event, not just for you, but for everyone in that fund.

So all investors would be born by this capital gains event, even though they didn't sell.

Whereas when you're on it, when you're with an ETF, you actually are selling to either another investor or to one of these authorised participants or market makers, and the capital gains actually get streamed through to them, not the other unit holders in the ETF.

So overall, I think that ETFs are a fantastic tax efficient vehicle and why more investors are looking to get after tax better outcomes than traditional managed funds.

Not just that, but the chart on the right hand side of your screen shows that money is consistently coming out of traditional managed funds, particularly the active domestic funds.

Overall, this looks at US fund flows.

and it's going into the low cost areas.

So we talked about low cost indexes and also the index managed fund as well.

So it's not necessarily that ETFs are winning so much, it's around this migration of cost, because as we innovate within the financial ecosystem, cost is a huge determinant factor of where people wanna allocate their money.

So I'm pretty bullish that that dark blue area in that chart,

will get a little bit smaller and the index domestic equity ETFs, which is that kind of teal chart, will continue to grow as more money comes out of actively mutual funds and into ETFs overall.

So

That was a little bit about kind of where we have been traditionally.

And I think the great thing about ETFs is they really have democratized investing into areas that you may have not thought you wanted to get access to previously because it was too hard.

And this is where there's niche esoteric areas, whether it be thematics or digital assets like cryptocurrency, there's sustainable investing as well.

We've got a useful framework at GlobalEx where we talk about innovation around thematics.

These are big megatrends that are really going to create long-term structural shifts in the globe.

You can plot those particular thematics on what's called an S-curve, which just talks about the different adoption phase that these particular thematics are going through.

Whether you're in that early phase of adoption, and we've been talking about that with the rise of EVs,

and genomics and lithium and battery tech if you're a little bit further along.

So we've seen the rise of artificial intelligence or if you're kind of in that late majority and that's where we see things like cloud computing or social media.

So it's a great way to identify how the different adoption of thematics are there and the great thing for that is there is usually an ETF for expressing that view in a thematic.

So you can see on the right hand side of your screen is the growth of thematic ETFs in Australia.

Even though they constitute around about 3% of the total market in Australia, this is a wave of innovation that I think is gonna be becoming more and more prevalent in clients portfolios, particularly for that satellite exposure that they're looking for.

Where are most of the thematic flows going?

Traditionally over the last year or so far in 2024, a lot is going into technology related themes, whether it be semiconductors, artificial intelligence, cybersecurity.

So it's a great way for investors to get exposure to this area.

And I've always thought that thematic ETFs can also be a nice little psychological thing to have in your portfolio, almost like a behavioural hack.

Because if you're heavily invested in these thematics from a, I guess, a brain capacity perspective, and that amount, your thematic ETF stops you from touching the 80% of your portfolio, which is just doing its thing in very vanilla broad based ETFs.

you're going to have a very good outcome when it comes to not disrupting that compound return that you're going to be getting from some of those underlying broad share market ETFs because they have historically, if you look at the share market, returned around about 10% per year.

Thematic ETFs, a little bit different.

They can be high performing thematics and they can also be low performing thematics as well.

But it's a great area of innovation and one that I see has many more tailwinds ahead of it.

So that was a little bit about the broader ETF market and why money is continuing to go into ETFs.

I see that more use from ETF investors, whether it be retail investors, financial advisors, institutions as well.

We're still a little bit behind in the adoption when it comes to our global peers.

But I foresee that the money that's going into ETFs is going to continue for not just years, but decades to come.

And we're still very early in the ETF adoption industry within Australia.

So whilst it is a multi hundred billion dollar industry at the moment, the wave of money coming in, the new products coming in, this is definitely going to be a trillion dollar industry and will continue to grow for many, many decades to come.

So with that, I might close up.

I know there were a few questions that everyone was keen on getting some insight to, and I'll hand it back to Angelino.

Thanks Mark, that's very interesting and it's certainly a very innovative space.

Now my first question for you is, it's been a great year for the Australian ETF sector with 37% AUM growth.

Now beyond the normal growth drivers of lower costs that you mentioned, liquidity, et cetera, have there been any emerging tailwinds helping drive the sector's growth of late?

Yes.

So I think there's been three main areas that I want to focus on in terms of more recently what's been driving the ETF growth.

The first is around active ETFs.

So I mentioned before that there are some unlisted active fund managers who are looking to bring out their strategy as an ETF wrapper because they are seeing how a lot of the money flow is going towards ETFs.

So if you look at the ETF market over the past year, it's experienced growth of around about 60 billion dollars in growth over the last 12 months, about 17 billion of that.

So just under a third has been from these active ETFs, either converting by just doing a mutual fund to active ETF conversion or by listing another share class of their existing fund as an ETF.

And I see that will probably continue as well.

We're going to see more ETF issues coming to the market.

The second is around the rise of digital platforms.

You're seeing whether it be low-cost brokerage platforms or the use of digital advisors like robo-advisors, they are constantly using ETFs for their clients to get access to.

I feel like that's actually spurred a lot of the adoption, particularly within Gen Z and Gen Y, like the millennials.

They are growing, you know, predominantly their proportion of ETFs is a lot higher than some of the boomers and other generations as well.

And also SMSFs.

There's been a growing trend in people wanting to look after their own super.

I think the ASX did an investor study back during COVID that only about 10 or 15% of people were using ETFs.

But that's now closer to 20 to 25% overall.

So I think between the active ETF conversions, the rise and just making it a bit more accessible, and also the different demographics, that's been, you know, three major tailwinds for why the ETF has experienced such strong growth.

Okay, my next question to you is, EDFs currently represent around 5% of the total Australian fund market.

So how much higher do you expect this to go in the coming decade and beyond?

It's a great question, Angelina.

And I think that it was that chart that I referred to around the penetration in Australia is still quite low.

There's about

but there's quite a few trillion dollars that are being managed within managed funds, but they are only growing at a rate of around about 7% per year.

So you're talking about a bit of an ancient dinosaur versus the new and improved latest technology in ETFs that's growing at about 30 to 40% per year.

So whilst we only account for 5% of the total market, and that's what I was showing before, if we follow the US, which is at 20 to 25%, there's plenty of room for this to grow.

And I think overall that whilst there's this migration from managed funds to ETFs because of the liquidity and transparency, we actually did some interesting analysis to show that the cost savings could be in the billions of dollars when it comes to ETFs.

So I feel like this migration will continue from funds to ETFs.

But yeah, to answer your question, I think there's plenty of room to grow and there's very little in terms of what's going to stop this growth in terms of hitting that penetration level that we've seen from some of our other global peers.

Oh, sounds very positive.

So are there any obstacles the ETF sector needs to overcome to fulfil its potential in the coming years?

It's literally the complete polar opposite of my previous answer, which is around all these massive massive tailwinds.

But yeah, I feel like with any innovation, like with financial innovation, there are going to be a couple of roadblocks.

The first is around misconceptions around ETFs.

And we do a lot of education with our customers, our investors and the broader industry.

I've seen a lot of fearmongering and scaremongering around how ETFs

or just generally the rise of index funds is owning too much of the market and what happens when everyone sells out and rushes for the door.

But the hard evidence shows that ETFs still account for such a small part of the overall market and it's really actively managed funds that are doing majority of the trading.

So I think dispelling some of those myths is going to be a big force in terms of what could be a barrier.

Then I think there's just this gatekeeping around platforms or traditionally tools that advisors use that don't have a lot of ETFs choice available on their menu.

And I have seen some platform providers that traditionally still have a lot of unlisted funds and not so much on ETFs.

So I still think there's this gatekeeping element that needs to get passed.

And finally is around product innovation.

So I feel that if there's more product information that comes within the ETF wrapper, you're going to see more money coming into the funds.

Whereas if there's very little innovation in that space, it may just stagnate or the growth rates might reduce.

That being said, most of the money is going to your low cost vanilla ETFs.

But overall, I mean, even here at GlobalX, we're constantly innovating.

Our theme is beyond ordinary ETFs.

We're coming up with investment ideas that were once

hard to get access to, but now can be done with one low-cost transparent wrapper.

So yeah, there are some headwinds overall, but I think that the tailwinds would outweigh them.

Well, talking about innovation, you mentioned the ESG-focused ETFs.

So with the demand at a decade low, do you foresee a recovery coming or is this a structural issue?

Yeah, it's one of the fascinating insights that and we do a lot of analysis around the ETF market that we found that ESG adoption is like you said, Angelina at a decade low.

If you go back to the peak of COVID when it was around about, I think it was 2021 or 2022, we saw around about 20% of money coming into ETFs were going to ESG strategies.

That's now pretty much decimated down to about 2% or 3%.

But I don't think that ESG investing is necessarily finished.

I think it's just a bit of green fatigue is the term that we've dubbed.

And I think that it's more a function of the interest rate environment that we've been in the last couple of years.

A lot of ESG related investments kind of price their cash flows down to 2050, where we want to get to net zero.

But once interest rates rise, the simple arithmetic of discounted cash flow analysis is that those valuations tend to fall.

I think that as well, there's been a lot of people refocusing their allocation on near term profitability and cash flow rather than these long dated securities.

And also politics is mixing in with ESG.

And I've always been on the view that you never want to mix your investing with your politics or what's going on outside of the investing sphere.

ASICs come in with a bunch of greenwashing allegations and against some fund managers.

And if you look at the US, they have actually seen the pickup in ESG fund closures.

So I don't think we're at that stage yet.

I still think Europe and Australia are different to the US because we do have

a bit more of an ESG focus amongst our investors, our superannuation funds, there are some ESG aligned options for there.

So I think that it's just been a little bit of fatigue, a little bit of cooling.

I don't think it's dead by any stretch of the imagination.

It's just been a reallocation of investor capital.

Whether it comes back is another question, but most of the money is going into just vanilla ETFs rather than the ESG based funds.

Yeah.

And is investor demand as high for active ETFs as it is for passive ETFs?

And if not, why is that?

Yeah, also very good question.

Because a lot of people would say, oh, you know, Mark, you've experienced, you said that a third of the growth was due to active ETF.

So investors must be resonating with them.

But the answer is no.

Most investors are not resonating with active ETFs.

In fact, over the last 12 months, there's been outflows from active ETFs.

And I think there's this lesson that, you know, even if you want to package this product as an ETF doesn't defeat the purpose that it's still an actively managed fund, which shows and the vast majority of evidence shows over the long term that these funds underperform a broad market index, which is what traditionally what ETFs follow.

So even though the active ETFs make up close to about a third of the products overall, they make up close to half of the total revenue of the ETF industry, which I think is quite fascinating considering how expensive they are.

But really, the outflows suggest that investors aren't really resonating with them too much.

That being said, in the US is different.

About a third of the flows in the US ETF market are going to active ETFs.

So it could be a factor on distribution.

It could be that Aussies traditionally love index-based ETFs.

But overall, I still think you've got active ETFs that will come to market.

Overall, the key will be around cost.

We have seen some active ETFs come out with low cost ETF options, which I think is very interesting, but naturally this migration isn't from active to passive, it's from high cost to low cost.

So will it continue?

I think index-based ETFs are simple, low cost, transparent.

That's another thing, even though active ETFs have launched, you can't see all their holdings when they look at their disclosures.

Some aren't 100% transparent.

So definitely look under the hood when you're looking at your ETF,

But so far, active ETFs have not been resonating with Aussie investors just yet.

And Mark, what's the minimum AUN you aim for when you launch a new ETF?

And what determines if an ETF attracts that critical mass of assets or not?

It's a good question, Angelina.

I think it obviously depends on the type of product.

Generally what happens is most ETFs, you try and get to a level of around about 50 to $100 million in terms of potential breakeven.

Depends on, like I said, the cost or the particular product structure.

That being said, there's many research houses or platform providers who have approved product lists that won't look at an ETF until it reaches round about 20 or $25 million.

So we don't design ETFs to close down.

Obviously, it wouldn't be in our commercial interest to do that.

But sometimes ETFs don't always stick.

And if there is a commercial decision around closing an ETF because it doesn't reach a certain size to meet the operational cost, because there's a lot of costs involved with an ETF.

You've got to pay your custodian the listing fees as operational cost, as PM costs.

very similar to like a spaghetti cannon.

Sometimes you throw ideas on the wall and not everything will stick.

So we have seen some closures happening so far this year.

Funnily enough, they actually have been active ETFs that have closed down because they haven't attracted critical mass, but there could be more closures to come because at the end of the day, ETF issue is also while they're providing a wrapper for investors to allocate their capital to, it still needs to be commercially viable.

So that's where the breakeven analysis or looking at the minimum AUM is important to consider.

So when you're looking at ETFs, have a look at the fund size and to see the track record of that ETF as well.

And your digital assets and fixed income ETF launches have been well timed.

Are there any other new investment themes you expect to cover in the short term?

Yeah, it's funny how you say well timed, I'd actually argue that our digital assets, we launched the first Bitcoin and Ethereum ETF here in the market in 2022.

And crypto markets had a massive downfall straight after we launched.

So it actually wasn't good timing, but I actually don't mind launching at a time like that.

But yeah, look, we're leader in thematics, we're leader in digital assets in innovation.

So I think that we're working on, you know, providing more exposure to other areas of the market that people may not consider as part of their portfolio, particularly innovation and fixed income, I think it's been important.

We launched a product a couple of months ago.

around Australian banking credit.

The ticket code for that is BANK.

I think that because there's only about 70 fixed income products available in the Australian universe, I think there's going to be more innovation to come, whether it's exposure within fixed income or different product structures.

I think as long as there's consistent fixed income innovation within the ETF wrapper, you're going to consider this to be a growing industry.

Around broader thematics, I think we'll see more thematic ETFs coming out, providing that exposure.

And overall, between digital assets, fixed income, thematic ETF investing, I think there's plenty of room to grow to get access to these strategies.

Yeah, for sure.

And are there any noteworthy risks on the horizon for the ETF sector?

Yeah, I guess similar to your question around, you know, are there any barriers or headwinds for the industry?

Like with anything, you know, regulation can play a part.

And I know not so much in Australia because it's still so small, but in the US there has been some consideration for these ETF providers or these passive index managers getting too big.

And naturally when managers become too big, the regulators start looking at them.

Like I said, it's not necessarily the the assets that dictate pricing, it's the trading that dictates pricing.

So I think a lot of these concerns aren't 100% valid.

But you know, when we get to a stage where 90% or 95% of money is in index based investing, then we can probably have that conversation.

But we're still very early on from there.

General market volatility isn't going to also protect you from being an ETF can't protect you from all volatility.

Naturally, if you're invested in risk on assets like shares or cryptocurrency, when markets fall, the ETFs will generally fall as well.

But there are tools to either monetize that volatility or actually protect you from that volatility.

Whether you're looking at defensive assets like bonds, like gold,

or even areas like covered calls where you can actually get more income from more volatility that there is.

So I think market volatility is one.

And finally, I'm not as optimistic about this being the ETF killer, as they call it, but direct indexing.

is definitely an area that's been probably a little bit more prevalent overseas.

But this is instead of using an ETF wrapper to get access to an index, you can just get access to the index itself, or particularly for clients who have certain ESG characteristics, or let's say you have a client that works for one of the publicly traded companies in an ETF, but you don't want to hold that company.

Direct indexing is a bit more customizable.

But that being said, I think it's gonna be for a select few people within the general investor base and the vast majority of people like the idea of an ETF wrapper.

So as I think a few areas which could potentially be risks, I think they're very low risk at the moment.

And like I said, I think the tailwinds of the ETF industry far outweigh the headwinds that are coming their way.

Thanks, Mark, for your presentation and the Q&A.

Appreciate it.

Thanks, Angelina, for having me.