New data from direct-to-consumer fund platform InvestNow shows a marked pandemic reaction in March last year followed by a swift swing back to growth assets.
However, the InvestNow figures – which track monthly net fund flows – reveal the COVID-19 crisis did shift asset class sentiment for the rest of 2020 with listed property, in particular, losing traction.
Mike Heath, InvestNow general manager, said both listed real estate funds and fixed income products experienced rising popularity on the platform in 2019 as investors diversified a little from broader equities.
“Listed property, probably the strongest performer in 2019, struggled to regain support after March last year,” Heath said in a statement. “While fixed income attracted mixed flows for the last three quarters of 2020 with investors generally favouring global bond funds over NZ fixed interest.”
But as the first wave of coronavirus crashed on world markets last March, InvestNow reported net outflows from all asset classes bar cash.
Tellingly, though, investors were least likely to sell global share funds during the peak panic compared to other assets. For example, the data shows investors on the platform sold almost five-times as many Australasian share fund units in March 2020 compared to international equities products.
“We saw a clear swerve away from risk assets in March when news of the coronavirus lockdowns first broke,” Heath said. “But by April NZ investors were back on the growth road with a notable preference for shares, especially via global equities vehicles.”
Global share funds continued to top the monthly platform charts for the rest of 2020, rising especially in the final quarter of the year: December flows into international equities hit almost twice the April figure, which saw a strong bounce back close to previous InvestNow highs for the asset class.
Despite dampened demand for fixed income funds in the latter three months of 2020, particularly, the platform stats suggest investors were making some defensive moves with record flows into diversified products.
Heath said “diversified fund flows were neck-and-neck with Australasian equities products in the last three months of the year”.
“Possibly, investors were becoming increasingly cautious about rising equity markets but less confident about managing the risk themselves through direct exposure to fixed income assets,” he said.
The InvestNow analysis also highlights a shifting pattern of flows between active and passive investment strategies. In the immediate aftermath of the March 2020 market crash, passive products actually recorded net positive flows on the platform while investors ditched active funds en masse.
Index fund flows roughly doubled the active market in April and May “before a more balanced trend emerged between the two investment styles”, Heath said.
“By year-end the split between active and passive fund flows was about even on InvestNow,” he said. “Perhaps as market volatility continues, investors may be more interested in active strategies, although index funds remain a popular approach – that’s why we remain focused on giving our investors a wide range of choice across investment styles and asset classes.”
Since launch in 2017, InvestNow has grown from scratch to manage over $800 million for more than 30,000 clients. Like fellow platform provider, Sharesies, InvestNow has also received a transitional licence to operate as a Financial Advice Provider – or FAP. Sharesies previously held a ‘robo-advice’ exemption under the former financial advice regime, which ended on March 15 this year as the Financial Services Legislation Amendment Act era began.