This represents a 27 per cent surge over 12 months, and a five per cent increase over the quarter.
Total net flows in the division were $438 million for the quarter.
The result included $20.9 billion from boutique fund manager Fidante Partners which saw a 46 per cent increase of FUM over 12 months and a 9 per cent increase quarter-on-quarter.
Fidante Partner's net flows for the quarter were $633 million, comprising $116 million in equity products and $517 million in fixed income products.
The remaining $11.7 billion in FUM came from the Aligned Investments business, which decreased one per cent over the quarter due to a reduction in institutional infrastructure mandates.
In addition to higher flows from Fidante Partners, the division also attributed more buoyant investment markets for the increase.
"We continue to attract strong inflows into our boutique funds management business Fidante Partners. Investors are responding strongly to the close alignment delivered by our model, as reflected in the 46 per cent increase in FUM," Challenger chief executive Brian Benari said.
Challenger reported total assets and funds under management (AUM) at $35.2 billion on 30 September, a 28 per cent increase over the past 12 months and 5 per cent increase quarter-on-quarter.
Benari confirmed that in addition to growth in both the Life and Funds Management business, Challenger is also on track to meet its 2013 retail annuity sales growth target of $2.25 billion (15 per cent) and a net book growth of 10 per cent.
"We are successfully extending the average tenor of retail annuity sales, which for the September quarter was 6.1 years, up from 5.1 years last year," Mr Benari said.
"A lengthening of tenor increases the future rate of net book growth, enables greater investment in longer-dated assets which earn a liquidity premium, and is more efficient in terms of distribution and administration," he said.
