Private credit might be less attractive than it was last year as investors rush into the market, but there are sweet spots to be found.
Fund inflows amounted to S$7.52 billion ($5.49 billion) in the first quarter, while outflows reached S$6.23 billion ($4.55 billion).
Equity unit trusts posted a net outflow of S$85.7 million ($62.6 million) in the January to March period, a reversal of the net inflow of $720 million ($526 million) in the previous quarter. Equity inflows totalled S$3.63 billion ($2.65 billion) or 48.24% of total fund inflows û a sharp fall from the 60.5% share in the previous quarter; equity outflows totalled S$3.71 billion ($2.71 billion). Within equity portfolios, money moved to emerging markets funds, while further redemptions were seen in global real estate and developed markets funds.
Fixed-income portfolios posted a net inflow of S$574.3 million ($419.8 million), with a strong focus on both domestic Singapore-dollar offerings and global bond portfolios investing in sovereign issues. Inflows reached S$1.430 billion ($1.045 billion), while redemptions totalled S$855.9 million ($625 million).
Broadly diversified products and mixed-asset funds posted a net inflow of S$391 million ($285 million).
Approved products under the CPF Investment Scheme (CPFIS) managed to end the latest quarter with a net inflow of S$80.5 million ($59 million), higher than the previous quarterÆs net inflow of $43.8 million ($32 million). The higher net inflow was due mainly to less redemption. CPFIS inflows as a percentage of total fund flows rose 5.5% to S$411.9 million ($301 million).
The first quarter kicked off with ôa dim outlook of worldwide stock market consolidation, following the seemingly endless subprime mess and signs of an imminent slowdown in the US,ö according to Lipper.
In the first quarter, investors relied on the US Federal ReserveÆs monetary easing policy to ease concerns over the fate of the US economy following the US credit crisis. While cutting interest rates helped shares worldwide recoup some of their losses, risk-aversion persisted.
ôThe key rule of the game remains risk-aversion, keeping investors more cautious in their participation in fund markets, although cheap valuations in equity may entice bargain hunting,ö Lipper says.
Lipper expects funds to continue to generally flow into Asian-themed funds. Risk-aversion will likely lead investors to pour more funds into diversified and mixed-asset products and bond funds, the firm says. It adds that new market-linked offerings such as in the Middle East, one of the regions able to weather the US recession storm, should not be ignored.
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Hesitancy aside, institutional investors eye Australia and Japan as promising geographies for private debt investments within Asia Pacific, with Greater China and Korea on the periphery.
While Asia still lags the global average, interest in sustainable projects is growing fast; the only thing needed now is the expertise to drive growth
Regulators keep their eyes open on tightening insurance industry by introducing more detailed risk management requirements, which could bring pressure on smaller players.