The uncertainty around COVID-19 led to the largest-ever net outflow of almost $4 billion from the Australian managed funds sector in March, according to global funds network Calastone.
This was also the sharpest redemptions surge ever recorded, with over $11.8 billion flowing out of Australian funds in a single month, however this was cushioned by strong inflows of $8 billion as investors reacted differently to the gravity of COVID-19, the firm said.
The firm’s managing director, Ross Fox, said that the magnitude of redemptions in March illustrated the effect COVID-19 was having on investment momentum in Australia, where aside from modest volatility events, the market saw month-on-month net inflows over a long period of time.
What is more, March saw the ASX 200 bouncing around in a range of 25%-30% below its February peak combined with long-term interest rates at historical lows, therefore the impact for the funds management sector was more acute as investor redemptions compounded the effects of market downgrades and reduced asset bases.
At the same time, fund flows in Australia remained largely in line with international markets as both Hong Kong and the UK recorded in March net outflows of $2.7 billion and $7.3 billion, respectively.
In Asia and Europe, the bond funds saw the highest outflows as political uncertainty produced more volatility throughout 2019 relative to Australia.
As far as April was concerned, Fox said the applications narrowly outweighed redemptions so far, a move which was viewed as a positive turnaround.
“The heightened activity that we have seen across our funds network at a time when most people are working from home is a testament to how well the sector has embraced technology and automation to solve pain points, whether they are legacy or new ones such as we are experiencing with COVID-19,” Fox said.
