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:


Most viewed in recent weeks

Lessons when a fund manager of the year is down 25%

Every successful fund manager suffers periods of underperformance, and investors who jump from fund to fund chasing results are likely to do badly. Selecting a manager is a long-term decision but what else?

2022 election survey results: disillusion and disappointment

In almost 1,000 responses, our readers differ in voting intentions versus polling of the general population, but they have little doubt who will win and there is widespread disappointment with our politics.

Now you can earn 5% on bonds but stay with quality

Conservative investors who want the greater capital security of bonds can now lock in 5% but they should stay at the higher end of credit quality. Rises in rates and defaults mean it's not as easy as it looks.

30 ETFs in one ecosystem but is there a favourite?

In the last decade, ETFs have become a mainstay of many portfolios, with broad market access to most asset types, as well as a wide array of sectors and themes. Is there a favourite of a CEO who oversees 30 funds?

Betting markets as election predictors

Believe it or not, betting agencies are in the business of making money, not predicting outcomes. Is there anything we can learn from the current odds on the election results?

Meg on SMSFs – More on future-proofing your fund

Single-member SMSFs face challenges where the eventual beneficiaries (or support team in the event of incapacity) will be the member’s adult children. Even worse, what happens if one or more of the children live overseas?

Latest Updates


'It’s your money' schemes transfer super from young to old

Policy proposals allow young people to access their super for a home bought from older people who put the money back into super. It helps some first buyers into a home earlier but it may push up prices.

Investment strategies

Rising recession risk and what it means for your portfolio

In this environment, safe-haven assets like Government bonds act as a diversifier given the uncorrelated nature to equities during periods of risk-off, while offering a yield above term deposit rates.

Investment strategies

‘Multidiscipline’: the secret of Bezos' and Buffett’s wild success

A key attribute of great investors is the ability to abstract away the specifics of a particular domain, leaving only the important underlying principles upon which great investments can be made.


Keep mandatory super pension drawdowns halved

The Transfer Balance Cap limits the tax concessions available in super pension funds, removing the need for large, compulsory drawdowns. Plus there are no requirements to draw money out of an accumulation fund.


Confession season is upon us: What’s next for equity markets

Companies tend to pre-position weak results ahead of 30 June, leading to earnings downgrades. The next two months will be critical for investors as a shift from ‘great expectations’ to ‘clear explanations’ gets underway.


Australia, the Lucky Country again?

We may have been extremely unlucky with the unforgiving weather plaguing the East Coast of Australia this year. However, on the economic front we are by many measures in a strong position relative to the rest of the world.

Exchange traded products

LIC discounts widening with the market sell-off

Discounts on LICs and LITs vary with market conditions, and many prominent managers have seen the value of their assets fall as well as discount widen. There may be opportunities for gains if discounts narrow.



© 2022 Morningstar, Inc. All rights reserved.

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. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). 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.

Website Development by Master Publisher.