Investors pivot to defensive ETFs
Research by Vanguard and BetaShares has shown a rotation by investors into fixed income and cash exchange traded funds.
BetaShares said sector flows were “markedly different” in September compared to the previous month with fixed income and cash ETFs seeing over 50% of inflows as investors remained cautious on equities.
This included high interest cash and floating-rate Australian bond exposures.
Fixed income saw inflows of $322 million, including $285 million in Australian bonds, and cash saw $292 million compared to $114 million seen in Australian equities.
This included BetaShares Australian High Interest Cash ETF, which saw inflows of $230 million, BetaShares Australian Bank Senior Floating Rate ETF and Vanguard Australian Government Bond Index ETF.
On a quarterly basis, Vanguard research found Australian bonds were the most popular sector in Q3 with inflows of $905 million, up from $806 million in the previous quarter.
Global bond ETFs also received $50 million in Q3, a reversal from Q2 when it experienced negative flows of $36 million.
Minh Tieu, head of ETF capital markets, Asia Pacific, said: “Investors have been tested by the unusual positive correlation between bonds and equities this year but there’s good indication that this lockstep is ending. Bonds will continue to be an effective portfolio diversifier and resume their role as a long-term source of income given the rise in interest rates”.
The industry lost $5 billion in September as a result of significant stockmarket falls and muted inflows of $0.8 billion, bringing total funds under management to $124.4 billion.
AUTHOR
Laura Dew
Recommended for you
Women are expected to inherit US$124 trillion through the intergenerational wealth transfer, but Capital Group has found they are twice as likely to rely on social media for advice over a financial adviser.
Challenger Investment Management has raised $350 million during the offer period for its new ASX-listed investment structure.
A week after Lonsec downgraded multiple funds from Metrics Credit Partners, rival research house Zenith Investment Partners has opted to retain its ratings for the same funds.
Strong adviser engagement has helped Praemium reach $1 billion in inflows on its Spectrum offering, with a deal with Western Australian wealth firm Euroz Hartleys expected to add as much as $2 billion.
