Market movements and investor flows drove the Australian managed funds industry up $36.10 billion during the September quarter, according to Morningstar research.
Total assets under management rose above the $1.0 trillion mark for the first time, settling at $1.02 trillion at September 30.
Morningstar says the driving force behind much of this growth was positive sharemarket performance, which cloaked tepid underlying fund flows across the majority of asset classes. Equities made up approximately half of fund industry assets but accounted for almost 80.0 per cent of the increase, underscoring the sensitivity of managed fund industry assets to the performance of the more volatile growth assets.
Equities-heavy fund managers correspondingly generally fared best. State Street Global Advisors’ assets base grew by a healthy $5.80 billion, while Schroder Investment Management also experienced robust assets growth of just over $3.0 billion, both attributable largely to domestic and international share assets.
Fixed income investors remained concerned about potential tapering of quantitative easing by the US Federal Reserve. The September quarter’s $860.0 million outflow from fixed income funds was almost double the June quarter’s outflow.
Redemptions from indexed vehicles accounted for more than 90 per cent of this outflow, pointing to a strong preference for active fund managers with the scope to mitigate risk and preserve capital. Investors also demonstrated a willingness to swap interest rate risk for credit risk, and favoured more defensive, opportunistic vehicles, expecting them to protect capital in the event of rising interest rates.
Flows to international shares funds were relatively flat for the second consecutive quarter. Those willing to invest in international shares in the September quarter favoured current market darling Magellan Global and low-cost passively-managed vehicles like Vanguard International Shares Index and BlackRock Indexed International Equity.
Closer to home, investors remained wary of Australian share funds, despite strong recent market performance, withdrawing over $960.0 million over the three months to September 30. This is likely to have stemmed from concern about whether the Australian economy and sharemarket can transition successfully away from the resources-led boom conditions. Two funds rated ‘gold’ by Morningstar’s fund analysts, Fidelity Australian Equities and Schroder Australian Equity, swam against the tide and attracted relatively healthy inflows.