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Advisers increasingly using ETFs to build portfolios

30 November 2016 By Jessica Amir

Exchange traded funds (ETFs) -- it's a $24 billion industry and the fastest growing market in financial services, and now advisers and investors are increasing using ETFs to build entire portfolios, according to Blackrock's ETF business, iShares.

iShares Australia head, Jon Howie, said over the last 12 months to two years, advisers and investors were increasingly using ETFS to build entire portfolios, as they realised how simple, low cost and transparent they were.

On top of that, he said, there was also increased variety and investment choice, with 128 ETFs on the market.

That differed from five years ago, when ETFs first gained traction in Australia, as they were predominately just used to access international securities, such as US stocks, he said.

As a result of the increased demand, iShares developed a set of core ETFS to build robust portfolios.

"So we've got Aussie equities, Aussie fixed income, international equities and international fixed income. Five exposures in total and just using those fixed exposures, it's possible to build a broadly diversified portfolio across asset classes," said Howie.

The range was also designed to bring down the costs of investors' portfolios, he said.

The cost of the iShares core range, was from 0.15 to 0.26 per cent in total management fees. Those were some of the lowest fees available in the entire market, Howie said.

If investors built portfolios just using the iShares core range, the total fees ranged between 0.16 and 0.17 per cent in total management fees.

"Again one of the lowest cost ways to build a globally diversified portfolio on the ASX."

Notwithstanding that, iShares S&P ASX Small Ordinaries ETF was ranked the third best performing ETF on the market, after it caught over 92 per cent of markets highs over the last year.

The small ords sector was a strong performer, largely from the bounce back in markets, he said.

"Like small cap mining stocks for example, so we know that as the commodity boom slowed down 12 or 18 months ago that some of those companies were under stress many of those companies have recovered somewhat in their pricing over the past 12 months and that has led to a performance boost in that small cap sector of the market."

For more information about iShares ETFs click here.