The latest data from Calastone has revealed that $13.8 billion of new capital was added to Australian managed funds in 2024, a fivefold increase on the year before.
According to the firm, Australian investors were in step with global counterparts, setting a new record for bond fund inflows of $12.2 billion, up from $4.5 billion in 2023. and surpassing the last all-time high set in 2021.
“Managed bond fund inflows in Australia have consistently swelled year on year since 2019, showing investors in Australia have invested in fixed income with conviction and consensus,” said Marsha Lee, Calastone’s ANZ head.
“Equity funds staged a modest yet decisive turnaround,” she added.
Notably, the overall rise in managed fund investments included a turnaround for equity funds, which recorded inflows of $380 million – a sharp contrast to the $1.60 billion withdrawn in 2023.
Interestingly, equity inflows last year were entirely directed into environmental, social and governance (ESG)-focused equity funds, reversing the $494.8 million ESG equity fund outflows recorded in 2023, and bucking the global trend.
“While it’s too early to tell if Australia is countering the ESG cooling trend, for now, ESG appears to remain a critical factor in asset allocation,” Lee said.
Calastone’s data, however, indicates that Australia was initially slower to adopt ESG investing relative to other markets, begging the question of whether this marks a unique shift or a lagging trend.
Global outlook
Globally, ESG equity funds faced continued pressure, Calastone noted, with investors withdrawing $23.8 billion between May 2023 and November 2024.
This has erased over a quarter of the $82.6 billion committed to these same funds in the preceding four and a half years.
According to the firm, actively managed ESG funds were hit hardest, losing $35.5 billion over the period. This represented more than half of the $61.7 billion previously allocated to active ESG strategies.
However, much like Australia, fixed income funds globally saw record-breaking inflows, at around $80 billion as investors capitalised on easing central bank policies.
“Central bank pivots and bond market reactions dominated the investment landscape in 2024, reaffirming that while equity funds grab headlines and generate high trading volumes, bond markets drive asset valuations,” Lee said.
“Bond funds have raised more capital than all other asset classes combined over the last six years.”
At the same time, equity funds globally saw net inflows of $5.4 billion in 2024, rebounding from the $32 billion withdrawn over 2022 and 2023 combined.
Index-tracking equity funds maintained their dominance for the third consecutive year, with investors adding $26.9 billion while withdrawing $21.5 billion from actively managed counterparts.
