Confident investors drive inflows

Resurgent investor confidence drove inflows into managed funds to new heights in 2013, with Australian investors favouring international shares over domestic equities and demonstrating a preference towards indexed vehicles, according to Morningstar's second annual Global Flows Report.

The report said that multi-sector offerings, which invest in a number of sectors and are seen as a one-stop-shop diversified solution, took in the greatest flows in 2013.

Multi-sector strategies took in $17.79 billion of net inflows, the report said, benefiting from a dependable stream of superannuation contributions; therefore their flows are not attributable to active investment decisions.

Double-digit Australian share market returns did not deter investors from shifting $5.79 billion out of Australian share funds as investors looked offshore for growth. This signals concerns amongst fund-holders that the Australian economy can successfully transition away from the resources-led boom which drove the market for the past decade, the report said.

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The report said the $847 million net inflow into international equities represented a four-year high for the asset class, following two years of outflows. This was most likely the result of investor concerns over sub-par economic growth and investors repositioning themselves to take advantage of the falling Australian dollar, according to the report.

The Morningstar analysis said that while Australia had historically been slow to adopt indexing relative to the rest of the world, 2013 had marked a notable change in the preference for indexed vehicles, moving closer in line with the global trend towards low-cost passive investment solutions.

The report stated investors demonstrated a clear preference for passive rather than active options, driven largely by increasing awareness among investors of the role of cost in investment outcomes.