How are managed funds tracking?
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Christine St Anne: Each quarter Morningstar puts together a report that tracks the inflows and outflows of the managed funds sector. To give us an insight into this report I'm joined by Morningstar's Darren Cunneen.
Darren Cunneen: Thank you for having me, Christine.
St Anne: Darren, so how are managed funds faring in these challenging times?
Cunneen: Well, the managed funds industry has been quite reactive to market’s whims. For example, in quarter one, risk-on environment, the managed funds industry gained just over $23 billion, whereas in contrast in quarter two, risk-off environment, the managed funds industry lost just over $15 billion. So, as you can see, it's been quite sentiment driven.
St Anne: We speak about outflows, but there are some managed funds that are getting inflows. Can you give us an insight into what sort of funds these are?
Cunneen: Sure Christine. As you can imagine, it's been a tough environment so investors have been out there looking for strongly performing funds. Now, as you know, past performance isn't a great indication of future performance so, investors shouldn't be chasing performance. However, investors have been rewarding funds such as Magellan's Global Equity Funds with inflows.
Magellan has really strong performance over the past year and has amassed, I think just over half a billion inflows. And then you also have, say, on the defensive side, you have fixed interest funds - they have been relatively flat following a surge of inflows over the past year. But we have seen investors reallocate from international strategies to domestically-focused strategies and this is perhaps with the aim of reducing exposure to the economic and political risks associated with international strategies.
St Anne: Darren, what about outflows? What managed funds are losing funds?
Cunneen: Well, at the other end of the spectrum, you have investors punishing some fund managers such as former market darling, Platinum International. Their flagship fund has received significant outflows over the past year, I think totaling just over one billion. So, you can see investors have kind of lost confidence in Platinum's ability to perform.
St Anne: Darren, investors seem to be having a love affair of cash, does the report reflect these sentiments?
Cunneen: Investors are definitely stockpiling cash. We've seen a 9.3% increase in cash under the management year-on-year. Investors are likely preferring the lowest defensive yield associated with cash. However, the Reserve Bank of Australia has cut the official cash rate by over 1% since May. So, this may lead investors to look elsewhere.
St Anne: Darren thanks so much for your insights today.
Cunneen: Thank you for having me, Christine.
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