In the first quarter, fixed income funds available for sale in Hong Kong and/or Singapore had the highest capital outflows of all asset classes, reaching $38.8bn, according to Morningstar’s latest net flow estimates.
The outflows “were a mirror-image of the seemingly endless hunt for yield in the post-financial-crisis era, which had funds focused on the riskier parts of the global fixed income markets”, the report noted.
“The riskier parts include global emerging markets bonds and high yield corporate bonds,” a spokeswoman for Morningstar told FSA.
Moreover, the overwhelming majority of funds that experienced quarterly outflows of around $1bn were income-orientated strategies, primarily within flexible bond and moderate allocation categories.
“The first quarter of 2020 was marked by significant equity market volatility across regions and sectors globally, while plunging prices across bond sectors and report of liquidity stress have rattled bond fund investors’ nerves,” Wing Chan, Morningstar’s director of manager research practice in Emea and Asia, said in the report.
In contrast, and surprisingly, equity funds experienced comparatively less outflows of $10.3bn in the first quarter. One reason is that investors had been cautious on equities in 2019 compared to income-orientated strategies, the report noted.
Last year, Asian equity funds had $36.8bn in inflows while fixed income funds pulled in $68bn, the research firm said.
March pullout
In total, all funds across asset classes available for sale in Hong Kong and/or Singapore recorded net outflows of $66.1bn during the first quarter.
Specifically, the March selloff resulted in net outflows of $100.8bn. That compares with $21.7bn and $12.9bn of net inflows in January and February, respectively, the report said.
Moreover, Chan noted that “at this stage, we have not identified any major liquidity concerns amongst the Morningstar medalists, which are funds that are positively rated by our analysts”.
“Looking ahead, managers who faced the crisis with enough dry powder have been best positioned to weather outflows and take advantage of current bargains,” he added.
Net flows by broad asset class
| Asset Class | No. of funds | Q1 Return (%) | Q1 Net Flows (in $bn) | March 2020 Net Flows (in $bn) |
| Fixed Income | 575 | -8.56 | -38.8 | -60.9 |
| Equity | 1,187 | -22.57 | -10.3 | -16.2 |
| Allocation (Mixed Asset) | 260 | -14.05 | -7.1 | -9.6 |
Note: Data from Morningstar Direct and includes only primary share class of each fund. Funds available for sale in Hong Kong or Singapore.
Five Largest Funds by Net Assets
| Group/Investment | Morningstar Category | Q1 Return (%) | Fund Size as of 31 Mar 2020 (in $bn) | Q1 2020 Net Flows (in $bn) | March 2020 Net Flows (in $bn) |
| PIMCO GIS Income E USD Acc | Global Flexible Bond – USD Hedged | -8.52 | 57.0 | -17.1 | -15 |
| JPM Global Income A (div) SGD | EUR Moderate Allocation – Global | -16.57 | 25.4 | -1.6 | -1.0 |
| AB American Income C Inc | USD Flexible Bond | -9.46 | 22.9 | -3.5 | -1.3 |
| Allianz Income and Growth AT H2 EUR | EUR Moderate Allocation – Global | -17.15 | 21.5 | -1.2 | -1.7 |
| PIMCO GIS GlInGd Crdt E USD Inc | Global Corporate Bond – USD Hedged | -6.70 | 18.1 | -2.1 | -1.8 |
