Asian investors showed the biggest reversal of sentiment towards fixed-income funds in 2023 while also maintaining more equity fund exposure than their peers around the world, according to the latest Global Fund Flow Data release from Calastone, a global funds network.
Investors in Asia allocated a net $9.4bn into fixed income strategies in 2023 – sharply reversing the trend in the previous year which saw $7.3bn in net outflows.
Indeed, this surge in fixed income investments was the largest reversal in investor sentiment seen in any region, Calastone found. Investors in Hong Kong almost reversed all outflows they made in 2022 by the end of the year, while those in Singapore and Taiwan invested more money than they had withdrawn.
“We have observed a decisive shift to quickly capitalise on attractive yields in fixed income in anticipation of interest rate reductions across the world’s major economies,” Justin Christopher, head of Asia at Calastone.
London-headquartered Calastone is global funds network, with around 4,000 clients in 55 countries, which processes about $317bn of investment value each month.
Hong Kongers place equity bets
Unlike investors in Europe and the UK which recorded clearly negative outflows, equity allocations in Asia actually saw a modest gain last year.
Equity funds took in $1.1bn in net inflows from Asian investors in 2023 thanks in large part to investors based in Hong Kong. Indeed, the latter played a pivotal role in almost completely offsetting net outflows recorded in 2023.
“At the same time, investors have been more willing to maintain equity fund exposure despite market volatility – likely to their benefit into the end of the year,” said Christopher.
Despite net outflows in Singapore ($376m) and Taiwan ($806m), Hong Kong investors almost single handedly offsetting any pessimism held by their regional peers. After a weak start to the year that reflected a stuttering reopening of the Chinese economy, Hong Kong added $1.6bn to equity funds.
In contrast, at a global level, equity funds saw $7.1bn in net outflows over the course of the year.
However, passive funds were more successively globally, with with index tracking vehicles having attracted $20.1bn in net inflows at the expense of active strategies, which saw $27.2bn in redemptions – the largest net outflow in the last five years.
Meanwhile, investors almost everywhere shunned ESG strategies amid growing scrutiny against greenwashing and vague classification criteria. ESG funds suffered net outflows of $10.2bn in 2023, compared with $51.2bn of inflows into equity strategies with an ESG label between 2020 and 2022.