Global investors have overwhelmingly favoured fixed income strategies since 2019 as measured by net transaction flows gushing through the pipes of fund network firm Calastone.
According to a new analysis by the back-office technology provider, bond funds have attracted more cash during the six years to the end of 2024 than “all other asset classes combined” with respective net flows of US$142 billion and US$113 billion over the period.
Last year alone investors poured a net US$52 billion into fixed income funds transacted on the Calastone global network out of a total US$61 billion of net flows across all asset classes for the 12-month period: the overall net flow figure in 2024 was more than double the US$23.9 billion clocked the previous year.
Calastone head of Australia and NZ, Marsha Lee, said in a release: “Central bank pivots and bond market reactions dominated the investment landscape in 2024, reaffirming that while equity funds grab headlines and generate high trading volumes, bond markets drive asset valuations.
“Bond funds have raised more capital than all other asset classes combined over the last six years. If sentiment shifts, a wall of cash could seek deployment, potentially into a still highly concentrated equity market.”
However, equity funds trading on the Calastone channels could only muster US$3.5 billion of net new money in 2024 even as stock markets bubbled to record highs – although last year’s result was significantly better than the 2022 and 2023 effort for share funds.
“Record trading volumes and small net inflows indicates lack of consensus as well as switching between fund sectors,” the report says.
The Calastone data also, mostly, confirms the ongoing shift from active to passive share funds.
“Equity index trackers proved far more attractive to investors everywhere than active funds in 2024 – investors added $17.5bn to passive funds and withdrew $14.0bn from actives,” the report says.
But the analysis also found net flows into global and North American actively managed share funds outweighed passive counterparts last year.
“While market sentiment remains divided, 2025 could be the year active equity funds reclaim their relevance,” Lee said.
The study found that active management retains its edge as well for fixed income fund investors where net flows have long favoured the style.
“Active fund managers are beating index funds for inflows in fixed income funds – 75% of 2024’s inflows were to actively managed bond funds; active funds have done better longer term too,” the Calastone report says.
The data also shows environmental, social and governance (ESG) funds continue to struggle despite a slight slowdown in net outflows from the sector year-on-year.
ESG funds saw almost US$3 billion of net outflows last year versus a US$6.4 billion flow gain for traditional counterparts.
“The ESG gold rush that took place between 2020 and the middle of 2023 has ended,” the report says. “Between May 2023 and November 2024, investors across our global network withdrew $15.5bn from equity funds with an ESG mandate, reversing more than a quarter of the $53.7bn that had been committed to such funds in the previous four and a half years.”
Regardless of flow nuances, overall funds under management covered by Calastone rocketed up by US$9.35 trillion in 2024 to a new record high of US$78.2 trillion – a year-on-year increase of 13.6 per cent and almost doubling over the previous nine years.
Global managed funds assets have “now comfortably surpassed the previous peak reached at the end of 2021, just before an aggressive succession of interest rate increases by central banks in most major economies began to suppress asset prices of all kinds”, the study says.
Headquartered in the UK, Calastone provides fund networking services to more than 4,500 clients in 56 countries (including Australia and NZ), processing more than £250 billion of transactions each month.
The survey data largely reflects retail and wholesale fund flows channelled via investment platforms.