Investors pivot to defensive ETFs
Research by Vanguard and BetaShares has shown a rotation by investors into fixed income and cash exchange traded funds.
BetaShares said sector flows were “markedly different” in September compared to the previous month with fixed income and cash ETFs seeing over 50% of inflows as investors remained cautious on equities.
This included high interest cash and floating-rate Australian bond exposures.
Fixed income saw inflows of $322 million, including $285 million in Australian bonds, and cash saw $292 million compared to $114 million seen in Australian equities.
This included BetaShares Australian High Interest Cash ETF, which saw inflows of $230 million, BetaShares Australian Bank Senior Floating Rate ETF and Vanguard Australian Government Bond Index ETF.
On a quarterly basis, Vanguard research found Australian bonds were the most popular sector in Q3 with inflows of $905 million, up from $806 million in the previous quarter.
Global bond ETFs also received $50 million in Q3, a reversal from Q2 when it experienced negative flows of $36 million.
Minh Tieu, head of ETF capital markets, Asia Pacific, said: “Investors have been tested by the unusual positive correlation between bonds and equities this year but there’s good indication that this lockstep is ending. Bonds will continue to be an effective portfolio diversifier and resume their role as a long-term source of income given the rise in interest rates”.
The industry lost $5 billion in September as a result of significant stockmarket falls and muted inflows of $0.8 billion, bringing total funds under management to $124.4 billion.
AUTHOR
Laura Dew
Recommended for you
The alternative investment manager has signalled its intentions to repackage an existing fund into a second private equity vehicle, targeting both listed and unlisted opportunities.
The acquisition of Mason Stevens by Adamantem Capital has reached completion, as the wealth platform looks to increase investment into its services for Australian wealth practices.
Platinum Asset Management and VanEck have both announced name changes to multiple of their ETFs to clarify their complexity.
Active ETFs are gaining traction in Asia-Pacific as wealth managers seek to blend the low-cost fees of passive with active management.
