Australia and New Zealand’s (ANZ) sustainable funds universe saw positive net flows of US$640 million during the September quarter, according to new data from Morningstar.
This followed revised outflows of US$555 million in 2Q24.
Morningstar noted that ANZ was one of only three regions to report positive flows over the period, with Europe and Asia (ex-Japan) attracting US$10.3 billion and US$2.5 billion, respectively.
Meanwhile, the US experienced outflows of US$2.5 billion, while Japan saw US$600 million and Canada US$100 million.
In total, the global universe of sustainable funds saw US$10.4 billion in investor flows during the quarter, up from US$6.3 billion in 2Q24.
For Australia’s own sustainable funds market, however, Morningstar observed the dominance of several fund managers who continue to hold the lion's share of the market.
“The Australian sustainable funds market remains quite concentrated, with the top 10 firms accounting for almost two thirds of total assets in sustainable funds, which has been stable this year,” the financial services firm said.
Namely, Dimensional Fund Advisors had the highest market share, of 14.6 per cent, followed by Betashares (11.9 per cent) and Vanguard (8.6 per cent).
Mercer, BlackRock, Australian Ethical and Pendal all had market shares ranging from 4.5 per cent to 6 per cent.
Moreover, two new sustainable funds were launched in the third quarter of 2024 - Altor Social Infrastructure and Macquarie Energy Transition Infrastructure - amounting to nine product launches in 2024.
“The nine fund launches so far this year consist entirely of active strategies, a significantly lower number compared with prior years, particularly from 2020 to 2022,” Morningstar underscored, adding that 2022 had already seen nine sustainable fund launches by its first quarter alone.
Meanwhile, there were five confirmed closures at the end of the third quarter.
“Interest-rate regime changes in 2022 have put active asset managers under profit-margin pressures caused by rising cost bases and limited revenue growth.”
Key drivers behind the closure decision, Morningstar added, were limited demand and underperformance in sustainable strategies .
Nonetheless, it said that the uptick of flows into sustainable funds “mirrors the continued recovery in the broader fund market in the region”.
Looking at ANZ, flows into active strategies resurged, netting almost US$267 million. Meanwhile, flows into passive sustainable funds continued to be positive in 2024, garnering US$373 million over the quarter.
By the end of September, according to the firm, the total fund and ETF universes for Australia and New Zealand experienced net inflows of US$9.52 billion, driven primarily by passive strategies, which received net inflows of US$6.73 billion, while active strategies saw net inflows of US$2.8 billion.
Moreover, equity strategies gained around US$570 million in net inflows, followed by inflows into fixed-income strategies of some US$125 million.
“However, allocation funds registered another quarter of outflows, albeit smaller compared with the previous quarter,” Morningstar concluded.
