Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 438

Fixed income flows are strong, but who's winning and why?

Fixed income is typically the quiet achiever in the Australian retail asset management industry. Recently, it has benefited from strong net flows with the mass exits from term deposits due to ultra-low rates and a steadily declining risk profile across the retail asset management industry as the market continues to mature and shift towards a retirement focus.

The role of fixed income in Australian retail asset management

Source: NMG Managed Funds Review (June 2021)
1 Multi-sector FUM and net flows excludes that attributed to MySuper

However, that tailwind is not treating all fixed income funds equally, and there is only a handful of winners.

Concentration of fixed income funds

As part of our engagements on building portfolios, advisers and their clients state they have different primary core objectives in their fixed income allocations: 

  1. Yield: nil (or very limited) potential for capital loss while seeking to generate a consistent yield 
  2. Defensive: reduce the volatility versus the growth asset allocations
  3. Diversifier: lower risk than growth assets but still generate some returns.

While these objectives are not mutually exclusive (in fact, most advisers have a primary and secondary objective), the primary objective has a significant impact on the types of products used and the resulting allocations.

Which fund managers are the winners?

Those eight products grouped in the exhibit above currently receiving half of fixed income net flow are particularly relevant to one of the objectives, and are therefore heavily supported by investors who use that as their primary approach to allocating to fixed income.

The leading funds are:

  • Ardea Real Outcome Fund
  • La Trobe Australian Credit Fund
  • Janus Henderson Tactical Income Trust
  • Vanguard Global Aggregate Bond Index Fund
  • iShares Australian Bond Index Fund
  • Vanguard Australian Fixed Interest Fund
  • Franklin Absolute Return Fund
  • PIMCO Diversified Fixed Income Fund

Instead of trying to appeal to all investors, these funds recognise they may be too hot or too cold for some objectives. Instead, they understand where they are ‘just right’ for a particular objective that advisers want from their fixed income allocations, and then target their product, sales and marketing activity accordingly.

Just as we have seen with equity fund allocations moving away from benchmark-relative products towards a barbell approach with a blend of passive and high conviction product, we are seeing fixed income allocations shift away from traditional products towards those targeted to one of these core objectives.

For fixed income managers, this means finding a 'Goldilocks' position, and making sure products are ‘just right’ and designed to meet one of these primary fixed income objectives.

 

David Hutchison and Andrew Cummins are Partners at NMG Consulting, part of the NMG Group. This article is general information and does not consider the circumstances of any investor.

 

  •   15 December 2021
  •      
  •   

 

Leave a Comment:

banner

Most viewed in recent weeks

Noel Whittaker’s take on the budget

Marketed as a fix for inequality and housing affordability, the latest budget instead delivers a tangle of tax changes that leave everyday Australians worse off.

Australia has no death duties. Technically.

Australia may not levy formal death duties, but a growing web of tax measures is quietly shaping what wealth passes between generations. Now, the 2026 budget adds another layer.

Lithium's rally is real this time – but no-one trusts it

The lithium rally mirrors the early-2010s tech stock surge, with demand set to double by 2030. Supply has been slow to respond, creating a market deficit for future tech like humanoid robotics and solid-state batteries.

Welcome to Firstlinks Edition 662 with weekend update

The debate over the budget is increasingly shaped by frustration and perceptions of unfairness, rather than clear-eyed assessment of policy outcomes.

How inflation is quietly moving the goalposts on retirement

Inflation doesn’t just raise today’s bills - it quietly increases the amount needed to retire, while simultaneously making it harder to save. Three steps to take before June 30th to improve retirement outcomes.

How to minimise tax with a will

Inheritance tax implications in Australia may surprise some, as poor estate planning without proper wills or trusts can lead to costly tax bills and delays for beneficiaries.

Latest Updates

SMSF strategies

Meg on SMSFs: The CGT changes don’t impact super but what about Div 296 tax decisions?

New CGT rules could tip the scales in the super vs non-super debate. For those facing the Division 296 tax, the case for withdrawing has gotten more complex. A "comparison rate" tool may help assess decisions.

Planning

Testamentary trusts post-budget: Estate planning, tax reform and the ‘death tax’ debate

Proposed Budget changes to taxation are casting new uncertainty over testamentary trusts, prompting closer scrutiny of estate planning structures and the real implications of reforms still taking shape.

Taxation

Income tax and bracket creep

Examining how five "tax cuts" stack up against bracket creep. Why offsets and incremental changes may do little to ease rising average tax burdens, compared to structural reform through indexation over time.  

Exchange traded products

The limits of a quality investing approach in Australia

Quality strategies shine globally, but Australia's concentrated market tells a different story. Limited diversification and sector dominance can constrain the defensive outcomes investors have seen in broader markets.

Investment strategies

Balancing opportunity and complexity

As private markets expand, investors face a growing mix of structures, a stabilising private equity cycle and uneven AI disruption. Fresh questions are being raised about where the real opportunities now sit.

Investment strategies

Why strong returns matter as much as generosity

As EOFY approaches, structured giving offers a tax-effective way to support charities, while allowing donations to grow over time and play a longer-term role in family wealth and legacy planning outcomes.

Investment strategies

The most important investment decision you’ll ever make

Stock picking often gets the spotlight, but research shows asset allocation explains the vast majority of long‑term returns. Understanding your mix of growth and defensive assets is the real key to investment success.

Sponsors

Alliances

© 2026 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.