Australia’s managed fund industry reached a record level of assets under management (AUM) over the June quarter, despite continuing bond market volatility, according to research from Morningstar.
Market movements and investor inflows increased managed fund investments by $12.60 billion over the quarter, with total AUM reaching the record high of $992.0 billion.
“This was the third consecutive quarterly jump in total assets under management and led to the all-time high asset figure,” Morningstar fund research analyst Darren Cunneen said.
Despite the record AUM figures, the fixed income market saw its largest quarterly outflows in over 18 months, with more than $218.0 million being withdrawn from local and global bond funds.
Fund holders withdrew $839.0 million from indexed bond funds; however, actively-managed bond strategies took in more than 621.0 million.
“Looking at flows between bond funds tells an interesting story,” Mr Cunneen said. “The exodus out of passively-managed fixed income funds, which we also identified in the March quarter, suggests lower confidence in index funds for defensive assets.
“Investors have clearly been concerned that, unlike many active strategies, passive funds won’t offer any tactical protection in the event of a rising interest rate environment.”
Multi- sector funds “dominated” the sector’s inflows, taking in more than $6.40 billion over the three months to June 30.
Yet investors remained wary of Australian share funds, with $1.0 billion being redeemed over the sector.
“Australian and international equities were as different as day and night,” Mr Cunneen said. “The former lost over $12.50 billion while the latter gained around $17.80 billion.
“Persistent outflows driven by concerns over a waning Australian economy, coupled with poor share market performance, contributed to the marked drop in domestic equities.”
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