In stark contrast to the flight-to-safety we witnessed throughout 2024, Australian investors have defied global uncertainty by cautiously rotating back into equities and managed funds appear to be among the biggest beneficiaries.
Following a notable drop in investment during February – when major events tested markets globally – a willingness by Australian investors to cautiously lean into volatility saw them add $3.15 billion to managed fund portfolios in April across all asset classes.
Further evidence of a major pivot in Australian investor sentiment - in the face of the United States administration’s tariff fallout - can be seen in the $8.6 billion invested in managed funds between January and May 2025.
To put this inflow into context, based on data from Calastone, the largest global funds network it is more than 20 times the weak $380 million that flowed into managed funds over the same period in 2024.
While Australian domiciled equity funds were hit hardest - down $800 million in February - three months of consecutive net inflows from March to May saw the asset class gain $1.25 billion year-to-date, a remarkable rebound from the $3.1 billion it lost from January to May last year.
The rotation back into equities - while scaling down their reliance on bonds – has also resulted in a strong comeback for multi-asset funds. While this asset class was an outlier in February, losing $180 million, year to date local investors have tipped $1 billion into Australian domiciled multi-asset funds.
To put that inflow into context, multi-asset funds lost $1.65 billion lost over the same period last year.
But while equity and multi-asset funds recovered in March, bonds recorded net zero flows as central banks delayed rate cuts, sending yields higher.
What’s clearly evident within recent fund inflows, notes Marsha Lee, Head of Australia and NZ, Calastone is how relatively insulated Australia has been from the Trump tariff fallout.
In hindsight, adds Lee, investors have been duly rewarded for leaning into volatility with equity and bond markets having returned to normal.
“Australian investors appear to be cautiously rotating back into equities while scaling down their reliance on bonds,” said Lee.
“With bond yields normalising, offering diversification benefits, we could see 60/40 funds re-emerge from the wilderness.”
