The month of March was certainly a tough one for Australian fund managers, with recent data showing that the sector had its largest ever month of net outflows.
According to an update by Calastone, the world's largest global funds network, fears and uncertainty around COVID-19 led to Australia's managed funds sector experiencing a net outflow of almost $4 billion in March.
Calastone automates fund transactions for 95% of Australian platforms and 75% of fund managers in the country, so has a very good overview of what is happening in the sector.
It advised that over $11.8 billion flowed out of Australian funds during March. This is the sharpest redemptions surge ever recorded across the Calastone network in the country.
And while this was cushioned by strong inflows of $8 billion, it couldn't stop the sector from recording the unwanted record of monthly net outflows of ~$3.8 billion.
Where were funds leaking from?
The release advises that these flows were mostly from bond funds. This was also the case in Asia and Europe, which recorded significant outflows of their own. Hong Kong recorded net outflows of A$2.7 billion and A$7.3 billion left UK funds.
Ross Fox, Managing Director, Head of Australia and New Zealand at Calastone, said: "The magnitude of redemptions in March illustrates the effect COVID-19 is having on investment momentum in Australia, where aside from modest volatility events, the market has seen month-on-month net inflows over a long period of time."
Mr Fox also notes that while many investors took advantage of the sharp decline by the S&P/ASX 200 Index (ASX: XJO) during the month, the impact on the funds management sector was more acute as investor redemptions compound the effects of market downgrades and reduced asset bases.
But the good news for shareholders of fund managers such as Magellan Financial Group Ltd (ASX: MFG) and Platinum Asset Management Ltd (ASX: PTM), is that this the leak appears to have been plugged.
Calastone has advised that applications are narrowly outweighing redemptions so far in April.
