After six months of record buying, Australian investors have “cooled their appetite” for equity funds in Q2, according to Calastone.
Calastone’s quarterly Fund Flow Index (FFI) showed during Q2 inflows to equity funds fell 19.7%, compared to Q1 and were more than two-fifths lower than the net amount of capital added in Q4.
Despite this decline, the $2.4 billion net inflow was still high and was around double the average quarterly total since early 2019, which was more than three times higher than the same period in 2020.
Over the whole three-month period, net buying of funds focused on Australian equities held up better than most other geographical flavours of equity funds, as inflows dropped by just 6%.
Global funds saw inflows drop 21%, while regionally-focused funds saw inflows fall by 40% which included emerging market funds that struggled due to a stronger US dollar.
Real estate funds struggled too as inflows fell to $115 million in June, their lowest level in 11 months, and more than 36% lower than the average since July last year.
However, fixed income saw a 42% quarter-on-quarter jump in net flows for Q2.
Ross Fox, Calastone head of Australia and New Zealand, said it appeared nerves about the delta variant of COVID-19 initially caused Australian investors to cut back on buying overseas-focused funds in Q2.
“But the outbreaks at home that prompted renewed lockdowns have progressively dampened appetite among Australian investors for Australian assets over the last three months,” Fox said.
“Across the developed world vaccination programmes have forged ahead in most cases far more quickly than ours has here.
“Having dodged the bullet in 2020, Australia is a sitting duck if infections take off before our vaccination rates catch up with our peers elsewhere.
“This has given investors pause for thought, evidenced by record sell orders in June. Given the benefits of diversification offered by global funds, it makes sense for Australians to spread their bets a bit.”
Fox said this drop should not be overstate as Australian investors were still net buyers of funds in Q2.
“The bigger picture suggests that the global economic recovery is strong, delivering positive earnings momentum for equities, both in Australia and abroad,” Fox said.
“If the current outbreaks are successfully controlled, there is no reason to expect a sudden rush for the exits over the quarter ahead.”
Net equity fund flows