Australian investors have shown remarkable resilience in the face of global economic uncertainties, adding $8.6 billion to managed funds in the first five months of 2025, according to data from Calastone.
This surge in fund inflows is a significant rebound from the $380 million recorded over the same period in 2024, highlighting what the report called “extraordinary shifts” in investor sentiment amid ongoing global market volatility.
Bond funds dominate, but momentum slows
Bond funds have maintained their dominance in the Australian market, with inflows of $4.1 billion year-to-date (YTD). However, the momentum has slowed following a record surge in the second half of 2024. High volumes of bond subscriptions in early 2025 were offset by redemptions, leading to net-zero flows in March as investors hesitated ahead of April’s tariff-induced market volatility.
Despite this, bond funds remain a key asset class, as investors continue to seek stability amid heightened geopolitical risks. The subdued rate cut expectations from central banks, coupled with rising bond yields, have dampened enthusiasm for bonds in some areas, but the asset class has still managed to secure significant flows.
Equity funds stage a comeback after February’s setback
Equity funds have experienced a strong rebound in 2025, recovering $1.25 billion YTD after enduring a challenging 2024. The year began with optimism following US President Trump’s re-election, only for confidence to waver in February as the prospect of rate cuts from central banks faded and profit-taking in equities intensified.
Australian domiciled equity funds were hit hard in February, losing $800 million, but have returned to three consecutive months of positive inflows from March to May, signalling a return of investor confidence.
The recovery in equity markets comes after a period of uncertainty, as the fallout from Trump’s tariff regime weighed on investor sentiment in the early part of the year. However, the positive market reactions in March through May have boosted confidence, and Australian investors appear to be cautiously rotating back into equities, Calastone said, marking a stark contrast to the flight-to-safety trend seen in 2024.
Multi-asset funds make a strong recovery
Multi-asset funds, which had struggled in 2024, are seeing a strong recovery, attracting $1 billion YTD. The sector had faced challenges due to the unusual correlation between bonds and equities during the post-COVID stimulus period, with low interest rates and government interventions disrupting traditional diversification benefits.
However, with bond yields normalising, multi-asset funds are gaining traction once again as investors seek diversification amid rising global volatility.
Marsha Lee, Head of Australia and New Zealand at Calastone, highlighted the cautious optimism of Australian investors.
"What’s interesting is how relatively insulated Australia has been from the Trump tariff fallout, with April net inflows rivalling record highs," she said.
"Investors… have been duly rewarded for leaning into the volatility as equity and bond markets normalised,” she added. “With bond yields normalising, offering diversification benefits, we could see 60/40 funds re-emerge from the wilderness."
Looking ahead
The managed funds sector has shown a resilient response to global uncertainty, with Australian investors demonstrating an ability to weather economic turbulence, according to the Calastone analysis.
As equity and multi-asset funds recover, bond fund flows are expected to remain muted unless central banks signal further easing. The strong comeback of multi-asset strategies suggests that investors are recalibrating their portfolios for greater diversification, signalling a shift back to traditional asset allocation models.