Australian investors add to managed funds amidst global uncertainty: Calastone
As major events and news tested markets around the world this year, Australian investors appeared cautiously resilient, adding $8.6 billion to managed funds between January and May 2025. This is more than 20 times the anaemic $380 million that flowed into managed funds over the same period in 2024.
Data from Calastone, the largest global funds network, captures extraordinary shifts in investor sentiment across early 2025. Optimism surged in January following US President Trump’s clear victory and return to office. But by February, confidence faltered as US exceptionalism faded, and central banks pushed back on rate-cut expectations. This reversal prompted profit-taking in equity markets and drove bond yields higher, posing challenges for most funds.
Australian domiciled equity funds were hit hardest, shedding $800 million in February before returning to three months of consecutive net inflows from March to May, helping the asset class to gain $1.25 billion YTD, a remarkable rebound from the $3.1 billion it lost from January to May last year.
February was also an outlier for multi-asset funds which lost $180 million, a blip in what has also been a strong recovery for the asset class. YTD, local investors have tipped $1bn into Australian domiciled multi-asset funds that lost $1.65 billion lost over the same period last year.
As equity and multi-asset funds recovered in March, bond funds recorded net zero flow for the month as high volumes of subscriptions entirely countered redemptions, likely signalling investor hesitation ahead of April’s tariff-induced volatility.
Liberation Day tariffs and the volatility that followed in April produced different responses from the managed funds sector. While Asian investors turned bearish that month, recording their lowest monthly net inflow YTD, Australian investors leaned into the volatility, adding $3.15 billion to their managed fund portfolios across all asset classes. April 2025 marked the highest total net allocation since July 2024 when dovish signals from central banks caused a surge in fixed income fund investment in Australia.
Commenting on the flows, Marsha Lee (pictured), Head of Australia and New Zealand at Calastone, said, “What’s interesting is how relatively insulated Australia has been from the Trump tariff fallout, with April net inflows rivalling record highs. The notable drop in investment during February was largely equities-led as uncertainty brewed and US exceptionalism faded. Demand for bonds also remained quite soft as central banks delayed rate cuts, sending yields higher. Investors however have been duly rewarded for leaning into the volatility as equity and bond markets normalised.
“Australian investors appear to be cautiously rotating back into equities while scaling down their reliance on bonds – a stark contrast to the flight-to-safety we saw throughout 2024. This is likely driving a strong comeback for multi-asset funds, which appear to be regaining their footing after extended and unusual periods of high correlation between bonds and stocks due to post-Covid stimulus and low rates. With bond yields normalising, offering diversification benefits, we could see 60/40 funds re-emerge from the wilderness.”
