Australian investors have been following global trends toward fixed income, despite the strong domestic share market performance, according to Morningstar.
Diversified fixed interest funds garnered over $2.93 billion over the 2012 full year as investors sought to mitigate the risk in the market.
"Fixed income funds were pretty much flavour of the year - investors are clearly preferring the perceived safety of the asset class," Morningstar fund research analyst Darren Cunneen told InvestorWeekly. "However, we have seen a shift in investor preferences.
"So investors have been coming out of this more Australian focus and they've been going into more diversified vehicles."
Despite the global managed fund industry increasing by 3.9 per cent on the back of organic growth, the sector fell short of the inflows seen in 2009 and 2010.
Investors withdrew $9.65 billion from Australian share funds over 2012, or nine per cent of assets.
"It is somewhat tied to investor sentiment. So when times are good and the outlook is rosy, investors will tend to prefer growth assets with the equities. But when the outlook isn't as great, investors do tend to become a bit more risk averse," Mr Cunneen said.
"Investors have been paying a lot of attention to the headline news - things haven't been great in Europe [and] there was the pending US fiscal cliff - so I think investors were reacting to that, pulling money out of Australian equities.
"It's also affected global equities, but not to the same extent."
While there are early signs of recovery and increasing investor interest in the equity market, Mr Cunneen said continuing uncertainty in global markets makes it difficult to predict where inflows will be seen.
"Obviously sentiment has picked up," he said. "I think investors are just unsure at the moment, so it is rather difficult to predict flows."
