Mutual funds regained all lost assets under management from 2022, with the value of mutual funds witnessing a surge by $10.7 trillion in 2023, data has revealed.
This resurgence catapulted the total value to $70.9 trillion, reclaiming the record set in 2021, according to Calastone’s Global Fund Flow Index Report 2023.
In trading, Calastone’s platform experienced a robust 10.0% increase in volumes throughout 2023, reaching $1.07 trillion. Notably, half of this volume was attributed to equity funds, while fixed income accounted for a quarter. Investors sought high-yielding options, leading money-market activities to soar to unprecedented levels.
Investors demonstrated a keen interest in high yields, with net inflows of $22.2 billion in the fixed income sector. This surge was propelled by a one-quarter increase in buy orders, while the appetite to sell remained unchanged.
In contrast, equities witnessed a withdrawal of $7.1 billion in capital, particularly from May onwards. However, this outflow was only slightly over half the levels seen in 2022, with UK and European investors displaying the most negativity.
Passive funds staged a comeback in 2023, attracting net inflows of $20.1 billion, while active funds experienced a downturn, shedding $27.2 billion.
ESG funds, which experienced a three-year boom with $51.2 billion in inflows, faced a surprising reversal, shedding $10.2 billion in 2022. The ESG backlash was particularly evident among European investors, indicating a global trend away from sustainable investing.
Property funds faced another challenging year, shedding $629 million of capital across Calastone’s global network. This marked the fifth consecutive year of outflows, totalling $6.5 billion since 2019.
In contrast, mixed asset funds witnessed a significant divergence in popularity in 2023, with European investors leading the way by committing a record net of $13.0 billion to the sector, signalling a dynamic shift in investment preferences.
Edward Glyn, head of global markets at Calastone, commented: “Our figures show that passive funds are once again in the ascendancy, bringing ever more pressure on fees. As demographics evolve, investors have very different expectations of how they want to interact with those providers of savings and investments – they want a seamless digital experience with fast settlement times. Technological change can help both asset managers and investors.”
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