The latest fund flow data from Calastone has revealed that managed equity funds recorded $3.63 billion of inflows during Q3, up from $605 million in the previous quarter.
According to Calastone, enthusiasm from Australian investors waned as the quarter progressed with $2.01 billion of inflows in July; $1.28 billion in August; and $342 million in September.
A similar pattern was seen for fixed-income funds, with investors adding $469 million in July and $683 million in August, but only $41 million in September as yields moved higher and prices fell.
Calastone managing director of Australia and New Zealand, Teresa Walker, said that the surge in global bond yields was driving a dramatic repricing of assets of all kinds.
“Australian investors have been highly tuned to the bond markets in recent months, buying equities and bonds when yields have fallen (and bond and share prices have therefore risen) and running for cover when market conditions have turned,” she said.
“Seasonal patterns explain some of the initial burst of inflows in Q3, but enthusiasm to buy the bear-market rally was much greater in Australia than we have seen in some of Calastone’s other territories, especially the UK. Investors may feel they have been caught out.”
Domestically focused equity funds accounted for 37 per cent of the net inflows to equity funds, above the long-term average of 34 per cent, with the second largest quarterly inflow in at least four years at $1.27 billion.
Meanwhile, Calastone reported that global funds gained $1.86 billion over the quarter, with only the Asia-Pacific region and European funds shedding capital.
“The distinct preference for domestic equities reflects the Australian market’s defensive characteristics. The economy is more resilient than in many other parts of the world, with lower inflation and solid public finances,” said Ms Walker.
“Crucially, the heavy income focus coming from the dominant mining and banking sectors means share prices are less sensitive to higher bond yields than, say US tech stocks, and Australian dividends enjoy exceptionally favourable tax treatment.”
Active funds accounted for three quarters of the total net inflow to equity funds and two-fifths was directed to ESG funds, almost all of which was actively managed.
Across all asset classes, managed funds recorded $6.07 billion of inflows during Q3 compared to $2.05 billion of outflows in Q2.
Jon Bragg
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.
