Yesterday, we looked at the latest data on the ASX exchange-traded fund (ETF) sector and the gyrations it has experienced in 2022 so far. ETF demand remains robust over the year to date. That's despite the fact that the sector has experienced some loss of funds under management. Largely due to the volatility and losses we have seen over the past few months.
But looking closer at the data, an interesting trend emerges. And it's one that is well worth a deeper dive.
So according to ETF provider BetaShares' Australian ETF Review for January 2022, the ETFs that received the most fund inflows over January were the ones we might expect. Namely index funds like the Vanguard Australian Shares Index ETF (ASX: VAS) and the Vanguard MSCI Index International Shares ETF (ASX: VGS). But it's the fourth and fifth ETFs in this list that represents an interesting trend.
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Cash is king for ASX ETF investors
So below three index funds, the next ETFs receiving the most in fund inflows last month were the iShares Enhanced Cash ETF (ASX: ISEC) and the BetaShares Australian High Interest Cash ETF (ASX: AAA). These ETFs experienced approximately $107.5 million and $100.2 million in fund inflows over January respectively.
Now those ETFs, if you didn't notice, are both cash-based ETFs. A cash-based ETF has more in common with a bank account than an index fund like VAS. They don't hold any underlying shares at all. Instead, each unit represents a cash-based asset, which is not too much more than money in a bank account. For example, BetaShares tells us that its AAA ETF "aims to provide exposure to Australian cash deposits, with attractive monthly income distributions… Assets are invested in deposit accounts held with selected banks in Australia".
So it appears ASX investors are looking to increase their cash exposure via ETF products like AAA and ISEC. This is perhaps not such a surprise. After all, many investors like to move their capital to 'safe' assets like cash during periods of market volatility. An interesting insight into how some ASX investors are coping with the recent volatility.
