A sharp rise in the value of Bitcoin and gaming-focused exchange-traded funds has delivered strong gains, nearly doubling investor returns over the last financial year. This reflects renewed interest in high-growth sectors, while also highlighting ongoing concerns about exposure to longer-term risk. Despite this outperformance, most new investor capital continues to move into low-cost index funds offering broad market exposure and diversification.
Bitcoin remains among the most volatile assets in the market, but recent analysis from InvestSMART shows the DigitalX Bitcoin ETF (BTXX) returned 95.5%. The Betashares Video Games and Esports ETF followed closely with a 90.3% gain over the same period. These figures come from a review of 388 ETFs tracked throughout the 2024–25 financial year and demonstrate how certain segments of the market are outperforming more conservative strategies.
Although ETFs centred on cryptocurrency, gaming and gold delivered standout numbers, investor preferences still leaned strongly towards broad, low-cost index products. Providers that offered large-scale exposure to both Australian and global equities captured the bulk of new inflows. The Vanguard Australian Shares ETF was the most traded, receiving $3.7 billion in net new investment.
The data also points to rising interest in developing sectors. Defence ETFs, which entered the market later in the financial year, achieved returns between 56% and 74% as they capitalised on heightened global tensions and an increase in military spending. In contrast, ETFs designed to benefit from falling markets, such as bear and hedge funds, saw some of the steepest losses with declines of up to 31%.
The ETF landscape in Australia continues to embrace a ‘core-satellite’ portfolio strategy. Investors typically channel most of their capital into broad, low-cost funds while making smaller allocations to riskier, sector-specific ETFs. Although Bitcoin and gaming ETFs may gain the headlines, the enduring appeal lies with index funds due to their reliable, diversified returns and low management fees, often below 0.1%.
With more attention being paid to costs, volatility and diversification, the Australian ETF market could continue growing at a pace of 15% to 20% annually. As digital-savvy investors inherit wealth across generations, the ongoing balance of risk and return provided by ETFs is likely to become even more central to long-term strategies.
