The diversified funds sector has experienced an increase of $10 billion in funds under management (FUM), growing from $42.2 billion to $52.2 billion during the December 2008/09 period, according to a Lonsec review.
While overall FUM increased across the board for the sector, the majority of diversified fund managers experienced outflows during this period, Lonsec senior investment analyst Deanne Fuller said.
“The increase in FUM is due to improved market performance rather than inflows, although a few managers did record positive flows, most notably index manager Vanguard, which experienced substantials flows totalling 13 per cent of FUM,” she said.
“Despite declining FUM, diversified funds continue to play an important role for investors, particularly those with limited capital to invest, and significant capital remains invested in them.”
Lonsec’s survey found there has been little change to the strategic asset allocation (SAA) within diversified funds since the last annual review.
Australian equities continue to dominate asset allocations, with managers allocating an average of 37 per cent to the sector, while global equities form the next largest allocation with an average of 24 per cent.
“While global property is considered to be a mainstream asset among multi-managers, less than half of the diversified growth funds we assessed allocate capital to this sector. Those that do allocate an average of 4 per cent,” Fuller said.
From 11 growth managers Lonsec reviewed, seven now include alternative assets in the SAA.
“Alternatives used include hedge funds, commodities, mortgages, infrastructure, high-yield credit and inflation-linked bonds,” Fuller said.
“The trend going forward is expected to be towards alternative assets with greater transparency and liquidity.”
The survey indicated that diversified funds have underperformed their multi-manager counterparts by 1 per cent over the last year.
