Fixed income specialists see boosted flows from defensive clients
Only three active asset managers are forecast to see positive flows in the upcoming year, according to Morningstar, with those focused on specialist fixed income or private markets in the best position.
In its Australian Asset Manager report for Q2 2025, the research house surveyed seven active asset managers in Challenger, GQG, Insignia, Magellan, Perpetual, Pinnacle and Platinum.
Average 12-month net flows for the firms were down 4 per cent of managed funds in the March quarter, the second consecutive quarterly decline after a 3.4 per cent in the previous quarter.
Fixed income – which also includes private debt, diversified credit and unconstrained fixed income – and cash are the only products managed by traditional active managers which are reporting positive flows with equities, multi-asset and “other” all reporting outflows.
This was attributed to investors seeking defensive positions in light of concerns around US tariffs and trade policy which dented their risk appetite and pushed defensive asset allocations above historical averages.
Equity analyst Shaun Ler said: “Among active managers, firms focused on conventional equity, fixed income, and multi-asset strategies remain at risk, given their replicability by passive vehicles. Conversely, firms specialising in less commoditised segments – such as private credit or specialised fixed income strategies – are better-positioned to grow.
“The US administration’s fickle stance on trade policy, geopolitical tensions, and supply chain disruptions create a challenging backdrop for capital markets. Fund flows across our coverage deteriorated for the second quarter into March 2025, and we expect medium-term flows to be lumpier than before as tariff uncertainties persist and rate cuts become more volatile.”
Previous research by Betashares identified the same trend occurring in ETFs, with cash and fixed income ETFs reporting inflows of over $1 billion during May.
The only three active managers which it expects to see positive flows between FY26 and FY29 are Pinnacle, Challenger and Insignia, with the other four expected to see outflows. In particular, Platinum Asset Management is forecast to lose more than 30 per cent of its funds under management per year over the period.
Even GQG Partners, which was previously identified by the research firm as a firm expected to increase its funds under management, thanks to its long-term performance track record, faces near-term challenges.
FUM at the firm has consistently risen since the start of the year after a period of outflows at the end of 2024, but its share price is down 23 per cent over the past year compared to gains of 9 per cent by the ASX 200.
Ler said: “As a group, our covered active managers lack the consistent outperformance needed to recapture market share lost to ETFs and industry funds. Most deliver only average peer-relative returns. Even GQG – despite a stronger long-term track record – faces near-term challenges, demonstrating the difficulty to consistently outperform.
“Competition remains intense, and firms will need to improve investment performance, realign incentive structures, pursue strategic partnerships, or increase investment in distribution to defend market share.”
AUTHOR
Laura Dew
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