Posted inMulti-asset

Investors shift to mixed asset funds amid equity volatility

Hong Kong and Singapore investors became more cautious in the second quarter, according to Morningstar Direct.

Mutual funds available for sale in Hong Kong and Singapore recorded net inflows of $39bn in the second quarter of 2021, down from $52.6bn in the first three months of the year, Morningstar Direct data shows.

Stock-betting investors are shifting their attention to allocation (mixed asset) funds, as they look for more diversity amid the rocking equity markets in the second quarter of 2021, according to the research firm.

Allocation funds brought in $15bn of new money for the first half of the year, reversing the $15.5bn net outflow throughout last year. They typically have 50% to 70% of exposure in equities and the remainder in fixed income and cash.

“More investors preferred global mixed-asset strategies, with strong inflows into the moderate allocation category,” said Kate Lin from the Morningstar editorial research.

“This balanced approach enables investors to capture both capital appreciation and income from stocks, bonds and cash.”

Although equity funds remained the most popular broad category, inflows dropped to $26.8bn in the second quarter, compared with $53bn in the first quarter.

Fixed incomes funds, on the other hand, continued to suffer the most outflows, with US dollar hedged global corporate bonds reporting an outflow of $2.5bn in the second quarter – albeit less than the $6.7bn of outflows during the first three months of 2021.

Investors also liked short-term money-market funds, which saw $6.9m of inflows in the second quarter, and Morningstar expects the trend to continue. “Money-market funds saw a year-to-date redemption of $14.2bn, implying that investors continued to deploy assets into the capital markets,” said Lin.

In terms of individual funds, the Allianz Income and Growth Fund outperformed its competitors with a net inflow of $2.2bn, followed by the GS USD Liquid Reserve Fund and the JPM Income Fund.

Overall, Blackrock, which has $208bn AUM, continued to be the asset manager absorbing most inflows in the second quarter, with a total of $7.1bn. Allianz Global Investors climbed to second place, with $4.4bn.

“Either reinvesting coupons earned from securities or distributing a portion of the fund– appeal to many investors,” said Lin. “Three of the top five categories on inflow were income-generating funds, with a bond or an allocation strategy.”

Part of the Mark Allen Group.