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  • Australian investors funnelled record amounts of cash into managed funds over 2021 according to global funds network Calastone
  • The massive increase was drive by pandemic savings over 2020 working hand-in-hand with increased market sentiment in 2021
  • Australian investors poured almost three times as much money into managed equity funds in 2021 compared to 2020, with investment into overseas-focussed funds surging
  • This comes even as the outbreak of the Omicron variant in late-2021 saw a downturn in managed fund purchases compared to the rest of the year
  • Real estate funds lagged compared to other industries in 2021, while funds focussed on small businesses saw some of the biggest increases in investments

Australian investors funnelled record amounts of cash into managed funds over 2021 as pandemic savings worked hand-in-hand with increased market sentiment, according to global funds network Calastone.

According to the Calastone data, Australian investors poured almost three times as much money into managed equity funds in 2021 compared to 2020, with inflows across all asset classes up 162 per cent to $35.7 billion compared to the $13.6 billion for each of the prior two years.

At the same time, investors more than doubled their subscriptions for fixed income funds.

Interestingly, the 2021 surge in managed fund investment was not a reflection of a pandemic-induced lull in 2020; the net inflow in 2021 was almost eight times larger than pre-COVID respective inflows from 2019.

Yet, the pandemic still had a major influence on the 2021 trends. Calastone head of APAC Ross Fox said because of COVID-related uncertainty and restrictions in 2020, investors were sitting on stockpiles of cash a year later.

“Australians have saved in record amounts during the pandemic, stowing away a seventh of their disposable income in 2020/21, almost three times more than in 2019,” Mr Fox said.

“They were rather cautious with all this cash in the first year of the pandemic, but by 2021, as a clearer exit route emerged in the form of vaccines, fund flows responded dramatically.”

Mr Fox said the flood of capital into managed funds in 2021 was a direct consequence of these massive savings combined with a higher risk appetite around the world.

It should be noted, however, that this risk appetite began to wane towards the end of 2021 as Omicron reached Australian shores and posed a new threat to many countries around the globe.

“December’s equity inflows were just a third of the peak in July, but they remained above the average for the last three years,” Mr Fox said.

“The signs from abroad are positive too: after initially greeting Omicron with real caution at the end of November, investors in many of the other countries Calastone serves generally considered that it is not a threat to stock prices and chose to increase their equity fund purchases in December.”

Australians looking overseas

According to the Calastone data, Australian equity fund buying peaked in the third quarter of 2021, in line with vaccine rollouts picking up steam. Australia lagged behind other countries because its vaccine drive started a few months later than in places like the UK and the US.

Australian investors also adopted a more internationalist approach in 2021, according to Calastone, with equity funds focussing on overseas markets accounting for two-thirds of all purchases, or $8.3 billion. Inflows to domestically-focused funds rose by 126 per cent compared to the 186 per cent increase for funds focussed on overseas markets.

Looking at different assets classes, real estate lagged compared to other industries, according to Calastone.

“Inflows rose by a quarter to $1.9bn, though this contrasts with outright outflows for the third consecutive year in the UK and the rest of Europe, where the impact of the pandemic has been much greater,” the Calastone report said of real estate funds.

In December, however, real estate inflows fell to just $22 million — one of the three weakest months in the last three years.

Contrarily, funds focussing on smaller companies were some of the biggest winners in 2021, as increased risk appetite in 2021 drove investors to more speculative plays.

Over the full year, Australian investors added $509 million to smaller company funds.

With over 2900 clients in 52 countries, Calastone is one of the world’s largest global funds networks.

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