Global equity fund inflows drop on higher US bond yields

Demand for global equity funds shrank in the week through Jan. 1, as higher US Treasury yields led to caution and investors took profits during the year-end trading lull.

Data from LSEG Lipper showed that investors added a net USD 4.93 billion worth of global equity funds, an 86% drop in inflows compared with about USD 35.1 billion worth of net purchases in the prior week.

The MSCI World index, which made a gain of over 15% in 2024, is down 1.5% this week after investors booked some profits following last year’s surge in stock valuations.

The increase in bond yields also dampened interest in equities, as the US 10-year Treasury yield rose to 4.641% last week, reaching its highest point since May 2.

By region, European, Asian, and US equity funds garnered net purchases of USD 2.25 billion, USD 1.64 billion, and USD 490 million, respectively, though inflows decreased from the previous week in all three regions.

Sectoral equity funds experienced outflows for a fourth consecutive week, totaling USD 2.35 billion. The largest withdrawals from tech, healthcare, and industrial sectors amounted to USD 453 million, USD 375 million, and USD 346 million, respectively.

Safer money market funds remained popular for a second successive week as they attracted USD 72.99 billion, the largest weekly inflow in four weeks.

Global bond funds experienced modest inflows as investors purchased government bond funds worth a net USD 878 million. Loan participation funds also attracted USD 320 million, whereas corporate bond funds saw net outflows of USD 573 million.

In commodities, investors ditched USD 141 million worth of energy sector funds, the fourth consecutive week of selling. Gold and precious metals funds also witnessed outflows of about USD 149 million, in contrast to purchases of a net USD 1.25 billion, the previous week.

Data covering 29,579 emerging market funds indicated that investors extended withdrawals into a eighth straight week, with about USD 1.39 billion worth of net sales during the week. Bond funds also witnessed a net USD 870 million worth of outflows.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; editing by Barbara Lewis)