ASX ETF sector continues to boom and hit record highs

ETFs just keep getting bigger.

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The rise in popularity of the exchange-traded fund (ETF) as an investment vehicle on the ASX is not a new one. We have covered ASX investors' seemingly insatiable appetite for ETFs many times here on the Fool.

But the age of the ETF might only be getting started, going off of the latest data.

According to ETF provider BetaShares, the ASX just had its best month ever in terms of ETF inflows. BetaShares' latest Australian ETF Review covers the month of September, and it makes for some interesting reading for any ETF (or investing) enthusiast.

The report found that September ended up experiencing the highest monthly net inflows on record for the ETF industry, with the entire ETF sector swelling by an unprecedented $2.9 billion over the month just passed. There are now $125.3 billion in ETF funds under management on the ASX, another record high.

Incredibly, BetaShares reckons the ETF market in Australia has grown by a compounded average growth rate of 46% per annum between July 2001 and September 2021. The growth rate over the past 12 months to September alone was 76%.

September also saw $9 billion in trading activity alone, matching the previous highs seen in March 2020. If you remember, March 2020 saw the worst of the COVID crash that dominated investor sentiment last year.

Which ASX ETFs got the most love from investors?

The ETFs which experienced the highest fund inflows in September were:

  1. BetaShares Australian High Interest Cash ETF (ASX: AAA) with $361.68 million in inflows
  2. iShares Core S&P/ASX 200 ETF (ASX: IOZ) with $313.01 million
  3. Vanguard Australian Shares Index ETF (ASX: VAS) with $195.41 million

Meanwhile, the top-performing ETFs over September were:

  1. ETFS Ultra Short Nasdaq 100 Hedge Fund (ASX: SNAS), up 14.1% over the month
  2. BetaShares US Equities Strong Bear Hedge Fund (ASX: BBUS), up 11.4%
  3. BetaShares Crude Oil Index ETF (ASX: OOO), up 9.8%

Interestingly, the top two performers were geared (leveraged) inverse ETFs, which are designed to rise in value when the broader markets fall. That makes sense since the US markets had a pretty dreadful month over September, as did the ASX 200. BetaShares characterised this trend as investors "buying the dip" using ETFs.

If the ETF sector keeps growing even when markets are falling, it certainly bodes well for its future.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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