Fixed income allocations lead fall in fund flows
Global funds network Calastone has released findings from its latest Fund Flow Index, revealing a combined 77% year-on-year fall in net inflows reported by managed funds across Australia.
This was down from $35.7 billion in 2021 to $8.3 billion.
Net inflows fell across all asset classes, with fixed income allocations suffering the sharpest decline — down 95%, from $10.5 billion in 2021 to $565 million in 2022.
Weak fixed income inflows came off the back of aggressive monetary policy tightening from the world’s central banks, aimed at curbing elevated inflation.
However, the data suggested investors were regaining confidence in the fixed income asset class, with a steady improvement seen over the last quarter of 2022. The fourth quarter was the first quarter since the first quarter of 2020 to see fixed income attract higher inflows than equities.
Teresa Walker, managing director of Australia and New Zealand at Calastone attributed the shift to changing market sentiment, with analysts expecting central banks to adjust their monetary policy strategy.
“Yields on fixed income funds are looking significantly more attractive in the wake of 2022’s bond market declines,” Ms Walker said.
"Investors have also recently begun to hope that the interest-rate tightening cycle may be nearing its peak both in Australia and overseas.
“These two factors have tempted them back into fixed income funds in the last few weeks of 2022.”
But according to Walker, sentiment “may yet turn bearish” amid continued uncertainty over the trajectory of interest rates and economic growth.
Meanwhile, equities investments also took a hit over the course of 2022, down 62%, from $14.9 billion to $5.74 billion.
This reflected a 15% decline in buyer demand, compared to just a 7% increase in selling activity.
Investor inflows to property funds dropped 78% ($445 million) in 2022 as property values declined, while mixed asset inflows slipped by over 60% ($2.5 billion).
AUTHOR
Charbel Kadib
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