Net inflows to managed equity funds dropped to $605 million in the second quarter, down from $1.21 billion in Q1 2022 and the lowest level since Q1 2020.
According to new data released by Calastone, inflows continued in both April ($489 million) and May ($369 million) before managed equity funds suffered $253 million of outflows in June.
“Signs of optimism are scarce as the global bear market shreds investor sentiment,” said Calastone MD of Australia and New Zealand Teresa Walker.
“June was the first time we have seen investors withdraw capital from every equity category (except Australian) and every asset class.”
The Australian equities category posted net inflows of $201 million during the second quarter, including $135 million in April and $29 million in May.
Calastone noted that June’s inflows of $36 million were roughly one-tenth of the average monthly inflow observed over the past two years.
“The relative resilience of Australian equities reflects the commodity and banking bias on the market. The Australian stock market is one of the highest yielding in the world and that has proven a big draw in times of rising inflation and interest rates,” said Ms Walker.
“Nevertheless, even appetite for Australian equity funds waned substantially in May and June. As fears of a global recession have grown, equities everywhere have seen a further convulsion of risk aversion. Commodity prices have fallen sharply too and that takes the shine off the Australian market even for domestic investors.”
The overseas equities category recorded net inflows of $524 million for the quarter, dragged down by $203 million of outflows in June, and ESG-focused funds experienced outflows of $78 million in June and inflows of $97 million across the full quarter.
Meanwhile, fixed-income funds suffered $1.52 billion of outflows, including $984 million in June alone, which Calastone said was driven by a sharp increase in selling activity.
“June’s outflow from fixed income funds was second only to March 2020, when bond markets globally convulsed as lockdowns descended worldwide. Central banks rode instantly to the rescue by pumping huge quantities of liquidity into the system,” Ms Walker said.
“No such help is available today. Indeed, central banks, including the RBA, are tightening policy rapidly in a belated attempt to squeeze out inflation, deliberately leaving bond markets to transmit tighter policy through the economy.”
Calastone also reported that the $2.05 billion of outflows seen across all asset classes during the quarter was the largest since it started keeping records of funds flows in 2019.
