Fixed income funds maintain blistering momentum in Australia, netting A$6.3 billion in 1H 2024: Calastone

After a bearish first quarter for Australia’s managed funds, local investors added A$3.21 billion to unlisted managed funds during Q2, the highest quarterly allocation since Q3 2023.  The change in sentiment stemmed Q1 outflows of A$1.92 billion, tipping the sector back into inflow territory with funds gaining A$1.3bn in 1H 2024, according to global funds network, Calastone.

1H 2024 flows were a marked improvement on 2023, which saw managed funds shed A$4.72 billion in 1H before recouping A$4.91 billion in the second half, mostly reflecting the rising demand for fixed income funds.

Fixed income fund flows continued their blistering pace as investors sought capital safety and strong yields, allocating a record A$6.26 billion in 1H 2024, almost three times more than their A$2.21 billion 1H 2023 inflows.  During the June quarter, fixed income funds grew by A$3.44 billion, the highest quarterly net inflow observed by Calastone since Q3 2021. Inflows swelled to A$1.41bn in May before halving to A$750 million in June as some central banks began to cut rates.

Equity funds endured their worst quarter on Calastone’s record, shedding A$2.23 billion in Q1, before recouping A$720 million in April as investors seized on market dips.  May and June outflows diminished these gains, finishing 1H 2024 down A$2.19 billion for equity funds.

2024 has so far proven to be another difficult year for mixed asset funds, which shed A$1.74 billion in 1H2024 compared to 1H 2023 outflows of A$1.55 billion.

Marsha Lee (pictured), Managing Director Australia and New Zealand at Calastone, commented, “The ongoing flight to fixed income among Australian investors aligns with global patterns we’ve seen across our network, reflecting a widespread preference for stable, income-generating assets amid market volatility and economic uncertainties, likely magnified by higher local costs of living.

“Away from fixed income, net flows have remained relatively muted as perceivably riskier assets stay sidelined until central banks signal a return to looser monetary policies.  Despite record outflows in Q1, trading in equity funds was very active throughout 1H 2024, with gross turnover notably higher than for fixed income funds. This shows that investors are actively allocating capital and that equity funds remain dominant in portfolios.”