[SINGAPORE] Total net inflows into Singapore-registered funds hit S$7.6 billion for 2024, a surge of 167 per cent from S$2.85 billion in 2023, according to a report by financial-services firm Morningstar on Thursday (Mar 27).
The funds logged S$1.7 billion in net inflows in the fourth quarter, down from a record S$3.1 billion in the quarter before.
In Q4, fixed income and allocation funds drew the most interest from investors, recording net inflows of S$758.8 million – though 60 per cent down from Q3, and S$630.1 million, respectively.
Equity funds regained some interest among investors, with net inflows of S$171.8 million.
Arvind Subramanian, senior analyst of manager research at Morningstar, said: “With global central banks initiating rate cuts and yields remaining attractive, fixed income funds have emerged as the most popular asset class in 2024, drawing strong inflows while equity fund investments remain subdued.”
Interest in money market funds, however, fell significantly. The asset class registered S$158.8 million of net inflows in Q4, down from S$1.5 billion in the quarter before.
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Subramanian noted that this suggests a possible shift towards longer-term products as investors look to mitigate reinvestment risk.
Two other asset classes drew less interest from investors, with outflows exceeding inflows. Alternative assets registered net outflows of S$1.3 million, while commodity-focused funds logged S$630,000 in net outflows.
For Central Provident Fund Investment Scheme or CPFIS-included funds, the overall three-month average return came in at 0.6 per cent in Q4, down from 2.5 per cent in Q3. They underperformed global stocks as the MSCI World Index – a proxy for global equities – advanced 6.2 per cent.
For the full year, CPFIS-included funds delivered a positive return of 11.3 per cent for investors.
In Q4, fixed income funds fared the worst, with negative returns of 1.3 per cent.
“The performance of equity funds was fairly muted with returns of 0.9 per cent. Allocation funds did marginally better with 0.9 per cent, followed by money market funds’ average return of 0.8 per cent,” said Morningstar.
For the full year, all asset classes posted gains. Equity funds led with a gain of 14.2 per cent; fixed-income funds and allocation funds also registered positive returns of 1.9 per cent and 10.1 per cent, respectively.
Money market funds also performed well, with an average positive return of 3.5 per cent.
Outlook
Looking ahead, Morningstar believes that mitigating tariff risks is key to identifying attractive opportunities in Asia’s equity markets.
The research house prefers domestic-oriented, service-heavy sub-sectors in China such as travel, where people still spend but trade down to cheaper options.
“We expect signs of stabilisation by mid-2025, as China’s government appears committed to restoring consumer confidence through more stimulus,” it noted.
On fixed income, Morningstar pointed out that investors can consider longer-term bonds which are likely to appreciate in price when interest rates decline.
It added that investors can also go global with fixed income by considering emerging markets debt that offer substantial yields that are well above inflation rates.
However, Morningstar also advised investors to approach with caution as these are likely to be more volatile than higher-rated bonds from developed countries.
