The drift to index funds continued apace among self-directed retail investors, new data from InvestNow has revealed.
During the six months ending September 30, the proportion of self-described passive-only investors on the direct-to-consumer platform jumped from 35 per cent to 43 per cent.
At the same time, the percentage of active-only investors – almost equal with index-heads on InvestNow at the end of March – fell from 32 per cent to 22 per cent.
About 35 per cent of investors swing both ways, the analysis found, in a proportion that increased only slightly over the six months.
The passive trend also shows up in InvestNow trading data for the calendar year to October 31: at the beginning of 2019 index funds represented 58 per cent of all trades on the platform compared to 70 per cent 10 months later.
In a statement, Mike Heath, InvestNow general manager, said: “InvestNow has a healthy mix of both active and passive funds,” Heath says. “While index investing has always been popular among our customers, the upward trend over the year is an interesting development.”
Despite the passive popularity, only two index funds – both courtesy of the NZX-owned Smartshares – ranked in the top 10 best-performing products on InvestNow for the 12 months ending October 31.
“And seven of those best-performing funds over the year were in the listed property sector,” Heath says.
According to the platform data, InvestNow members did ride the property trend up over the year as the proportion of those holding listed real estate funds jumped from 17 per cent to 33 per cent during the six months to September 30.
“In one sense the growing appetite for listed property funds is not so surprising as they tend to offer higher income that investors value more in this low interest-rate environment,” Heath said in the release. “Even so, we were surprised to see the real estate fund investor numbers double over such a short time period.”
The InvestNow analysis also picked up an interesting quirk in the income fund flow data. While the number of investors on the platform using multi-asset income funds was more-or-less static for the six-month period, those already with exposure to the products increased their holdings by 30 per cent over the half-year stretch.
“Clearly, investors already holding income funds have been pleased with how the products performed,” Heath said.
Term deposit investors on the platform were also weighting to the short-end of the range, he said, as six-month offerings dominate flows.
InvestNow introduced term deposits last year with five banks now distributing via the platform including latest arrival, Heartland.
The squeeze on interest rates has put pressure on investors who rely on term deposits for income, rather than as interim parking spots.
“… it will be interesting to see where term deposits sit alongside income funds for our customers looking for income from their portfolio,” Heath said in the release.
Since launch almost three years ago InvestNow has grown to almost $400 million in funds under management and 16,000 plus members.