Equity Trustees’ latest research, which examined the most recent funds launched by the firm, has revealed that global equity continues to be the preferred choice for local investors.
Namely, global equity funds accounted for almost a quarter (22 per cent) of the 100 most recent funds launched by Equity Trustees, a decline from 43 per cent in 2022.
In contrast, domestic equity funds constituted only 15 per cent of the funds launched, indicating a preference for international exposure among investors.
Fixed income emerged as the second most sought-after asset class, with domestic fixed income representing 19 per cent of funds launched by Equity Trustees, surpassing the 15 per cent attributed to global fixed income.
According to Johnny Francis, general manager of business development and custody at Equity Trustees, fixed income funds included corporate and government bond funds, asset-backed securities and notes coming to market, and several private debt and credit funds.
“This was clearly a reflection of tightening market conditions spurred by tightening fiscal policy and rising interest rates in response to rising inflation and geopolitical volatility,” he explained.
Mr Francis noted that the majority of the latest 100 new funds were directed towards retail investors (47 per cent), with less than a third (31 per cent) directed towards wholesale investors.
He also pointed out that there was a significant increase in funds being developed by boutique managers exiting larger organisations, with questions remaining regarding whether this trend will continue over the next 12 months.
Additionally, Mr Francis assessed that more than half (51 per cent) of these funds were registered while just over a third (34 per cent) were unregistered.
Moreover, he noted that over the last year, a significant majority of funds launched were hedged (84 per cent) versus not hedged (16 per cent).
“The nature of erratic rising and falling markets has created an appetite for funds to use a variety of strategies including the leverage of non-traditional assets to help manage volatility,” Mr Francis said.
Equity Trustees also reported that alternative products continued to maintain their popularity, encompassing a diverse range of assets such as commodities, infrastructure, foreign exchange, and quant strategies. Exchange Traded Funds (ETFs) constituted 12 per cent of the market, while Real Estate Investment Trusts (REITs) represented a mere 1 per cent.
Dilan Ashton, general manager of responsible investing at Equity Trustees, added that 13 per cent of funds had an environmental, social and governance (ESG) theme or were sustainable development goals-focused.
“Generally in the market, there were record inflows into Responsible Investment offerings, reaching $1.54 trillion in assets under management (AUM), representing 43 per cent of all professionally managed funds,” Mr Ashton said.
“AUM in sustainability-themed investments has more than doubled to $161 billion over the 12 months ending 31 December 2021.”
Interest in digital assets, however, stalled, according to Equity Trustees, pending clearer regulation.