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Australian ETF market sets an all-time record amid COVID-19

Investment company Stockspot has just released its 2020 ETF research report, revealing the best and worst-performing ASX exchange-traded funds (ETFs) and providing insight into this increasingly popular investment option. 

The report found that the Australian ETF market grew by 24% over the 12 months to March 2020, with ETF funds under management (FUM) increasing from $45.8 billion to $56.9 billion.

Over the last year, 23 new ETFs were introduced to the market, taking the total number of ETFs in Australia to 212.

Investors turn to ETFs amid heightened uncertainty

The report revealed that ETF trading volumes in March 2020 set an all-time record that was almost triple the previous monthly record. As the ASX entered a bear market, there were nearly 800,000 ETF trades in March. That’s 8 times the historical average of 110,000 monthly trades.

According to the report, the market sell-off welcomed consistent inflows to Australian-focused ETFs and those focused on other parts of the world, while active ETFs experienced significant outflows. This reflects the greater importance investors place on transparency and liquidity in times of volatility.

Best-performing ASX ETFs

Commodities were front and centre in the report’s best performers for the 12 months to March 2020, with the ASX gold sector performing strongly. ETF Securities’ ETFS Physical Gold ETF (ASX: GOLD) posted a 43.1% return. Hot on its heels was Perth Mint Gold (ASX: PMGOLD), which saw a 1-year return of 42.9%.

This reflects the safe-haven status of gold, with investors flocking to the precious metal on the back of increasing COVID-19 uncertainty and record-low interest rates. Notably, the report also found that there is now $2.3 billion in physical gold ETFs listed on the ASX, more than double last year’s figure of $906 million.

According to the report, physical gold outperformed ASX gold mining companies, which delivered a return of 23%.

Worst-performing ASX ETFs

The dreaded pole position belonged to the BetaShares Crude Oil Index ETF (ASX: OOO), racking up a negative return of 64.6%. This is a synthetic ETF that aims to provide investors with exposure to WTI crude oil futures, which have been on a downward spiral and crashed into negative territory at the back-end of last month.

In second place was the BetaShares Global Energy Companies ETF (ASX: FUEL) which experienced a 46.7% fall. Since most major energy companies are largely exposed to crude oil prices, this ETF suffered a similar fate to OOO.

Most popular ASX ETFs

The Vanguard Australian Shares Index ETF (ASX: VAS) retained its crown as the largest ASX ETF and was the most popular choice for investors in terms of net flows. In the 12 months to March 2020, the VAS ETF experienced $1.6 billion of inflows. According to Vanguard, VAS now manages $4.8 billion of ETF funds as of 30 April 2020.

The second most popular choice for investors was another broad-based Australian share market ETF, iShares Core S&P/ASX 200 ETF (ASX: IOZ). IOZ enjoyed $871 million in new money coming in.

Perhaps unsurprisingly, gold also featured, with the ETF Securities GOLD ETF experiencing the third-highest inflows of $629 million.

If you’re interested in investing in ETFs, be sure to check out the Fool’s top ETFs for 2020. And if shares are also up your alley, don’t miss the report below.

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Motley Fool contributor Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.