The downturn was keenly felt by Australian managers, which had to compete with much higher term deposit rates than their overseas counterparts, and Tria raised the question of whether, once the appeal of growth assets returned, inflows would be directed back to managed funds or to direct investments.
“Was this a really deep cyclical downturn for the funds, or a structural downturn as well?” Tria managing partner Andrew Baker said in his latest Trialogue update.
"That question is now being answered. It can be observed by looking at movements within wrap platforms, where fund versus direct investing decisions can be made,” he said, declaring “funds are back”.
Net term deposit inflows started declining in June 2012, while Australian equity fund net inflows doubled between December 2010 and March 2013, and global equity fund net inflows had more than tripled in that period, according to Tria data.
“This is great news for fund managers, which will (presumably) have seen these trends in their individual net inflow positions. The cyclical recovery is on, providing some desperately needed relief from recent conditions,” Mr Baker said.
However, he cautioned it would be a mistake to “declare victory” and said it could not be assumed conditions would return to pre-crisis conditions.
Structural headwinds remain, including technological improvements supporting direct investments, cost pressures facing managed funds and regulatory changes evening the playing field.
Funds can help their cause by positioning themselves around asset classes that are hard for investors to do themselves, such as international assets and fixed interest outside of deposits, Mr Baker said.
“It’s a reminder for fund managers to do the controllable well, while hoping for good performance to come through, and that innovation still pays,” he concluded.
