Which asset class was the ‘biggest winner’ with advisers in 2023?

Adviser Ratings funds management fixed income bonds

1 July 2024
| By Jasmine Siljic |
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Fixed interest has been crowned as the asset class which received the highest net flows and organic growth throughout last year, according to Adviser Ratings.

Between December 2022 and December 2023, the investment category enjoyed strong positive net flows of $11.7 billion and a one-year organic growth rate of 6.3 per cent.

Adviser Ratings’ Australian Financial Advice Landscape 2024 report described fixed interest as the “biggest winner” of 2023, despite being the “biggest loser” of 2022.

“Through 2023, only fixed interest experienced strong positive net flows and therefore achieved strong positive organic growth,” it wrote.

“Fixed interest therefore did not just display strong absolute organic growth this year (6.3 per cent), it also increased its year-to-year growth rate by 5.4 per cent (from 0.9 per cent to 6.3 per cent) and ‘swam faster than the tide’ by significantly outpacing the system’s overall growth rate change between periods.”

Diversified global fixed interest was recognised as the biggest subsector within the asset class at $59 billion in net assets, followed by Australian fixed interest at $55 billion.

Meanwhile, all other asset classes experienced modest net outflows last calendar year.

Asset class Net flows 1 year organic growth 
Fixed interest   $11.7 billion 6.3 per cent
Property and infrastructure    -$0.6 billion -0.9 per cent
Australian equities -$1.2 billion   -0.5 per cent
Cash -$1.4 billion -2.3 per cent
Global equities -$2.8 billion - 1.0 per cent
Alternatives  -$3.3 billion  -11.3 per cent

Source: Morningstar

“Interestingly, cash was in net outflow too, which was unusual. Typically when risk assets (particularly equities) are in outflows, cash will be in inflows, representing a flight to safety,” the report noted.

“Our hypothesis for this anomaly is yield chasing, driven by the current high inflation rate. We believe investors have been more inclined to ‘stray’ out of cash (and advertently or inadvertently go up the risk curve) to invest in the likes of mortgage funds and private debt funds.”

Overall, the Australian unitised investment management market experienced virtually no net inflows in the system at $2 billion in both 2022 and 2023.
 

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