Aussie investors flee managed equity funds in Q2

Australian investors rushed to the safety of fixed income and cash and fled managed equity funds at record speed, with property and mixed asset funds experiencing record outflows during the second quarter, according to the Fund Flow Index from Calastone.

As a result, equity funds suffered record outflows in the second quarter which marked the first time Calastone recorded two consecutive quarters of net outflows from managed funds.

Across all fund types, outflows totalled a net $2.8 billion, with investors reducing exposure to the riskier assets such as equities, property and mixed asset funds, while fixed income (FI) funds offered their best yields in years and posted strong inflows and the prospect for capital gains.

Equity funds saw the largest outflows, totalling $1.65 billion between April and June, easily the worst quarter on Calastone’s record.

At the same time, global equity funds bore the brunt of the selling in the second quarter, shedding a net $1.52 billion and domestically focused Australian equity funds saw a net outflow of just $59 million.

On top of that, environment, social, governance (ESG) equity funds, which cut across geographical categories, shed $508 million and saw  consecutive outflows for five months, having only shed capital in two months out of the previous two years.

But investors added capital to emerging market (EM) funds a net $4 million.

Mixed asset funds, which tend to be heavily weighted towards equities saw record quarterly outflows of $544 million, while property funds also suffered their worst quarter on record, shedding $173 million.

“Global equity funds have borne the brunt of outflows as investors are losing confidence in the prospects for the global economy. Australia-focused funds have seen remarkably little selling yet this country is not immune to today’s global trends,” Teresa Walker, Managing Director of Australia and New Zealand at Calastone, said.

“Meanwhile, fixed income funds which are offering attractive yields at present, saw net inflows of A$582m in the second quarter. This is not a record but stands in stark contrast to trends in riskier assets. June’s shock rate rise from the RBA pushed bond prices down and this slowed the inflows, but with yields now having reset at even more attractive levels this slowing may well prove temporary.”