Funds available for sale in Hong Kong or Singapore recorded net inflows of $49.5bn during the three months to the end of June, after severe outflows in the first quarter of this year, Morningstar Direct data showed.
Fixed income funds attracted the largest inflows, gathering $33.8bn in the second quarter, with US dollar-hedged global corporate bond funds the most popular sub-category, with $8.6bn of net inflows.
“After suffering from heavy redemptions in March, bond funds are back in favour and corporate bond funds saw the largest net inflows after the Federal Reserve’s announcement to purchase corporate bonds in March,” said Wing Chan, Morningstar’s director of manager research practice for EMEA and Asia.
The data confirms trends identified by other reports of fund flows in April and May. For instance, the Hong Kong Investment Funds Association found that global fixed income funds had the highest net inflows among all products, followed by Asia bond strategies.
Furthermore, about 82% of managers operating in Hong Kong surveyed by Cerulli Associates earlier this month, indicated that they will be promoting Asia fixed income strategies to distributors over the next two years.
Nevertheless, despite the renewed appeal of corporate fixed income in general, which was also suggested in a recent survey of fund selectors in Asia by Last Word Media, inflows failed to fully offset the $38.8bb of net outflows suffered in the first quarter of the year.
Net Flows by Key Asset Classes*
|
Asset Class |
Net Assets (USD billion) June 2020 |
Market Share June 2020 |
Q2 Average Return |
Q2 Net Flows (USD billion) |
Q1 Net Flows (USD billion) |
|
Fixed Income |
673.8 |
39% |
8.26% |
33.8 |
-38.8 |
|
Equity |
758.7 |
44% |
19.67% |
11.8 |
-10.3 |
|
Allocation |
196.7 |
11% |
12.85% |
-1.1 |
-7.1 |
Source: Morningstar Direct
*Locally domiciled and cross-border open-ended funds that are registered for sale in Hong Kong or Singapore are included. China-domiciled funds that are registered for sale in Hong Kong via the Mutual Recognition of Funds scheme are not included.
In contrast, net inflows of $11.8bn into equity funds more than compensated for the $10.3bn of outflows between 1 January and 31 March.
“Equity funds saw inflows as risk appetite improved, with technology funds leading the charge,” said Chan.
Indeed, technology products accounted for almost half of fund net purchases, garnering $5.2bn. That confidence appeared justified, with technology funds posting an average return of 31.65%, according to Morningstar Direct.
Healthcare, China A-shares and global large-cap growth attracted the next largest net inflows, said Chan.
While the growth theme retained its support, value-style investment still seemed to have little appeal, with US large-cap value funds proving the least popular equity sub-sector, with net outflows of $1.5bn.
Moreover, risk aversion and caution remains prevalent. US dollar money market funds attracted net inflows of $5.7bn, despite the US Federal Reserve cutting its benchmark interest to near zero in late March.
Net flows Morningstar Fund Categories
|
Fund Category |
Net Assets ($bn) June 2020 |
Q2 Average Return |
Q2 Net Flows ($bn) |
Q1 Net Flows ($bn) |
|
The Leaders |
||||
|
Global Corporate Bond – USD Hedged |
39.9 |
3.2% |
8.6 |
-2.3 |
|
USD Money Market – Short Term |
27.1 |
0.07% |
5.7 |
-9.1 |
|
Sector Equity Technology |
36.4 |
31.65% |
5.2 |
1.3 |
|
The Laggards |
||||
|
Global Emerging Markets Bond – Local Currency |
23.0 |
8.66% |
-2.3 |
-1.6 |
|
Global Flexible Bond |
21.4 |
5.02% |
-1.7 |
-5.1 |
|
US Large-Cap Value Equity |
6.8 |
13.87% |
-1.5 |
-1.0 |
