UNIT trust equity funds have rebounded in the second quarter with S$261.2 million inflows, compared with S$116 million outflows in the previous quarter, based on Morningstar’s report on Singapore fund flows released on Thursday (Aug 22).
The higher yields offered by the funds was the main draw but “it remains to be seen if this trend will be sustained in equity, but it’s still encouraging”, said Arvind Subramanian, senior analyst of manager research at the financial services firm.
The Singapore market favoured the global large-cap blend (value and growth) equity and large-cap growth equity, while Greater China equity and Singapore equity received the least interest during Q2.
Unit trusts in Singapore posted net inflows of S$1.8 billion for Q2, up 88.9 per cent from S$975.3 million in the first quarter, according to data submitted by the participating members of the Investment Management Association of Singapore. Fixed income led the pack with inflows of S$906.9 million, followed by money-market funds with S$622.2 million of inflows. Equity funds rounded off the top three.
Commodities and alternatives registered inflows of S$5.8 million and S$4.1 million, respectively.
For Central Provident Fund Investment Scheme (CPFIS)-included funds, their overall three-month average return fell to 3.1 per cent in Q2 from 4.9 per cent in Q1.
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Global equities, with the MSCI World Index as a proxy, averaged a positive return of 3.1 per cent over the same period, down from 11.4 per cent in Q1. Global bonds, with the FTSE World Government Bond Index as a proxy, saw a negative return of 1.2 per cent.
Over the one-year period ended June 2024, the CPFIS funds averaged a positive return of 9.7 per cent on a cumulative basis, while global equities returned 20.4 per cent and global bonds registered a negative return of 0.5 per cent.
Subramanian noted: “In reviewing the performance of CPFIS funds, it is worth noting that they cover a diverse range of categories with a relatively higher concentration of Asia-focused funds, reflecting investor demand. As a result, the significant performance divergence between Asian and global markets plays a part in influencing the average performance of CPFIS funds.”
Morningstar said: “While all asset classes finished with a gain (in Q2), equity funds fell slightly to 4.1 per cent, with allocation funds gaining only 2.5 per cent compared with 4.3 per cent in the last quarter.”
It added that money market was stable with 0.9 per cent, with fixed income reversing its losses in the last quarter to post a marginal return of 0.03 per cent, among the CPFIS funds.
Over a one-year time period, all asset classes notched up positive returns, with equity funds maintaining their lead with a gain of 11.9 per cent. Fixed-income funds registered an average positive return of 2.2 per cent while allocation funds reported a 8.8 per cent return. Meanwhile, money-market funds also performed well, with an average positive return of 3.7 per cent.
“Moving into the third quarter, much of the broader geopolitical narrative remains unchanged,” stated Morningstar, pointing out that the United States-China relationship, the US election, as well as the ongoing geopolitical crisis in the Middle East and Ukraine remain in focus.
“Should the tariffs conversation come into play, some volatility is to be expected, but this will also bring new opportunities for the investor,” it added.
Subramanian said: “I think these fund flows are always more a function of the market itself and flows tend to chase the market… it’s what we tend to see, especially given a very volatile environment in the last few years.”
