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.

 


 

Leave a Comment:

banner

Most viewed in recent weeks

Which generation had it toughest?

Each generation believes its economic challenges were uniquely tough - but what does the data say? A closer look reveals a more nuanced, complex story behind the generational hardship debate. 

Maybe it’s time to consider taxing the family home

Australia could unlock smarter investment and greater equity by reforming housing tax concessions. Rethinking exemptions on the family home could benefit most Australians, especially renters and owners of modest homes.

The best way to get rich and retire early

This goes through the different options including shares, property and business ownership and declares a winner, as well as outlining the mindset needed to earn enough to never have to work again.

A perfect storm for housing affordability in Australia

Everyone has a theory as to why housing in Australia is so expensive. There are a lot of different factors at play, from skewed migration patterns to banking trends and housing's status as a national obsession.

Supercharging the ‘4% rule’ to ensure a richer retirement

The creator of the 4% rule for retirement withdrawals, Bill Bengen, has written a new book outlining fresh strategies to outlive your money, including holding fewer stocks in early retirement before increasing allocations.

Simple maths says the AI investment boom ends badly

This AI cycle feels less like a revolution and more like a rerun. Just like fibre in 2000, shale in 2014, and cannabis in 2019, the technology or product is real but the capital cycle will be brutal. Investors beware.

Latest Updates

Weekly Editorial

Welcome to Firstlinks Edition 628 with weekend update

Australian investors have been pouring money into US stocks this year, just as they start to underperform the rest of the world. Is this a sign of things to come? This looks at 50 years of data to see what happens next.

  • 11 September 2025
Exchange traded products

Are LICs licked?

LICs are continuing to struggle with large discounts and frustrated investors are wondering whether it’s worth holding onto them. This explains why the next 6-12 months will be make or break for many LICs.

Retirement

We need a better scheme to help superannuation victims

The Compensation Scheme of Last Resort fails families hit by First Guardian and Shield losses, as well as advisers who are being wrongly blamed for the saga. It’s time for a fair, faster, universal super levy solution.

Investment strategies

5 charts every retiree must see…

Retirement can be daunting for Australians facing financial uncertainty. Understand your goals, longevity challenges, inflation impacts, market risks, and components of retirement income with these crucial charts.

Economy

How bread vs rice moulded history

Does a country's staple crop decide elements of its destiny? The second order effects of being a wheat or rice growing country could explain big differences in culture, societal norms and economic development.

Investment strategies

Small caps are catching fire - for good reason

Small caps just crashed the party like John McClane did in the movie, Die Hard - August delivered explosive gains. With valuations at historic lows, long-term investors could be set for a sequel worth watching.

Defensive growth for an age of deglobalisation, debt and disorder

Today’s new world order appears likely to lead to a lower return, higher risk investment environment. But this asset class looks especially well placed to survive, thrive, and deliver attractive returns to investors.

Economy

Will we choose a four-day working week?

The allure of a four-day week reflects a yearning for more balance in our lives. Yet the reliability of studies touting a lift in productivity is questionable and society may not be ready for such a shift anyway.

Sponsors

Alliances

© 2025 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.