Asian investors favour bonds as fixed income dominates

Calastone's latest Asia Fund Flow Index shows Asian investors channelled most net new money into fixed income funds in 2025, with bond strategies accounting for the bulk of inflows across the year.

Across all asset classes, Asian investors recorded net fund inflows of USD43.4 billion in 2025. Calastone said inflows were positive in 10 of 12 months, despite periods of market volatility and a rebalancing effect in December.

Fixed income funds led allocations. Bond funds attracted net inflows of USD28.2 billion over the year. Calastone described stronger demand through the middle of the year, with the largest monthly inflows recorded in July and August.

Justin Christopher, Head of Asia, Calastone, linked the shift to a preference for defensive positioning.

"2025 was defined by a clear investor preference for stability. Fixed income remained the anchor allocation as investors sought more predictable returns in an uncertain environment. Even when sentiment softened at times, demand for bond strategies quickly reasserted itself - highlighting the depth of conviction behind defensive positioning and yield-led portfolio construction," said Justin Christopher, Head of Asia, Calastone.

Fixed income flows

Calastone said the strongest period for fixed income occurred through June to August, when monthly net inflows rose sharply. It cited peaks of USD4.8 billion in June and July. It also pointed to stable global conditions and attractive yields as factors coinciding with the rise in allocations during that period.

The pattern shifted at the end of the year. December delivered net outflows of USD2.4 billion for fixed income. Calastone said this aligned with year-end portfolio rebalancing and liquidity management. It also cited cautious rate and currency positioning as investors assessed the outlook for 2026 amid persistent geopolitical uncertainty.

The annual totals still left fixed income as the dominant destination for net buying in the region. Calastone framed bond allocations as the "anchor allocation" within portfolios during the year.

Equity swings

Equity funds showed a different trajectory. Calastone said equity flows proved more volatile than fixed income, reflecting changes in risk appetite as investors reacted to market and policy developments.

Equity funds recorded net inflows of USD2.3 billion in the first quarter. The second quarter reversed that trend, with net outflows of USD1.5 billion. Calastone attributed part of the risk-off move to tariff-related headlines and uncertainty around global trade policy. It also noted that April and June each recorded USD0.7 billion of net outflows.

Calastone said equity flows remained under pressure through July, stabilised in August, and then recovered into the final quarter. From September onwards, equity funds returned to net inflows. Calastone said equity funds ended the year with net inflows of USD1.1 billion in the fourth quarter. It pointed to USD0.5 billion of net inflows in both October and November.

Multi-asset resilience

Multi-asset funds posted net inflows of around USD8.2 billion across 2025, according to Calastone. The firm said subscriptions totalled approximately USD39.3 billion, exceeding redemptions of around USD31.1 billion. Calastone linked the net inflows to continued demand for diversified strategies during the year.

Calastone also highlighted a mid-year slowdown in multi-asset demand. It said that period aligned with portfolio simplification and a preference for single-asset defensive exposure, particularly fixed income, during heightened tariff-related uncertainty. It reported that flows strengthened again into late summer and finished the year strongly.

Christopher described the year as a shift in risk positioning rather than a withdrawal from markets.

"What we saw through 2025 was not a retreat from investing, but a recalibration of risk. Investors remained active, they simply concentrated flows into areas offering resilience and predictability. As conditions improved into Q4, risk appetite returned, but in a measured way, reinforcing the value of diversification," said Christopher.

Calastone said the figures reflect transactions across its network in Asia between January and December 2025, covering subscriptions and redemptions initiated by fund distributors based in the region. It said each order typically reflects aggregated activity from multiple underlying client trades and that the data represents only volumes transacted on its network.

Calastone processes USD300 billion of investment value each month and operates across 58 countries and territories, according to the company. It is a wholly owned subsidiary of SS&C Technologies Holdings.