The global mutual funds industry has long shrugged off the effects of the pandemic, even though infections continue. The value of open-ended funds had recovered from the first quarter of 2020 pandemic-induced low point, according to a report by Calastone, a global funds network.
AUM has continued to climb. By the end of the third quarter of 2021 open-ended funds were worth $68.3trn, exactly a quarter more than their pre-pandemic peak at the end of 2019. More than nine tenths of this capital is in the hands of retail investors, with the rest owned by institutions, the report said.
Investors can choose from 129,215 funds. This number has increased by one sixth in the last five years, driven mainly by emerging markets. In China, roughly one thousand new funds are being launched each year – there are ten times as many funds in operation today than there were a decade ago, according to Calastone.
In 2021 active funds worldwide saw inflows of $40.4bn, compared with just $12.5bn for index funds. Almost two thirds (64%) of the net new capital to active funds in 2021 was supplied by ESG strategies. By value about half of this ESG cash went into active global ESG equity funds.
Of the remaining $14.7bn of active cash, “traditional” (for example, non-ESG) global equity funds were the main winners on Calastone’s network in 2021, led by UK and European investors, followed by Asia-Pacific (principally from Singapore-based investors), Australian funds targeting the domestic market, and emerging markets.
Early year bias
Equity funds on Calastone’s network saw inflows concentrated in the first half of the year, peaking at $8bn in March. In Europe, for example investors began to withdraw cash from equity funds in September, to be followed in October by those in the UK, Taiwan and Hong Kong.
Meanwhile, technology funds are falling out of fashion. As long duration assets, they have benefited from rock-bottom interest rates and huge liquidity in recent years. But, like smaller companies, they too are vulnerable to higher bond yields, according to the report.
June to September saw net outflows for four consecutive months (the longest run in the three years). Between October and November, no net new cash flowed into tech funds.