Calastone has revealed Australia’s managed funds copped their highest net outflows in March, with redemptions across the funds network totalling to more than $11.8 billion during the month.
The new data has captured the movements of money throughout the network, which automates fund transactions for 95 per cent of Australian platforms and 75 per cent of fund managers in Australia.
The Australian managed funds sector, impacted by fears and uncertainty around COVID-19, saw net outflows in the Calastone network of almost $4 billion in March. The funds shedding was cushioned by inflows of $8 billion.
Calastone reported Australia had performed largely in line with international markets, with Hong Kong seeing net outflows of $2.7 billion, while the UK posted $7.3 billion outflows.
The flows were primarily from bond funds, as was the case in Asia and Europe, after pre-existing political uncertainty and market volatility in 2019.
Calastone managing director and head of Australia and New Zealand Ross Fox commented: “The magnitude of redemptions in March illustrates the effect COVID-19 is having on investment momentum in Australia, where aside from modest volatility events, the market has seen month-on-month net inflows over a long period of time.”
Calastone noted as the ASX fell 25 per cent to 30 per cent below its February peak and long-term interest rates were at historic lows, the impact for the funds management sector has been more acute as investor redemptions compounded the effects of market downgrades and reduced asset bases.
The data showed November 2018 to be the only other month to experience material net outflows, which coincided with a period of volatility in local and global equity markets.
There was also a modest outflow in February, at which time the market was digesting the royal commission’s findings.
Net inflow spikes were observed around the end of tax year in July and August when portfolios normally rebalance.
Mr Fox said that applications narrowly outweighed redemptions so far in April, a positive turnaround from March.
“The heightened activity that we have seen across our funds network at a time when most people are working from home is a testament to how well the sector has embraced technology and automation to solve pain points, whether they are legacy or new ones such as we are experiencing with COVID-19,” he said.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].