Global equity fund outflows hit nine-month high on inflation fears

In the week ending September 16, global equity funds experienced their largest weekly outflow in nine months, amounting to a net $23.21bn. This sharp decline in equity fund investments was largely driven by a surge in oil prices, which exacerbated inflation concerns and heightened expectations of an upcoming interest rate increase from the Federal Reserve.

As crude oil prices reached four-month highs, investors became increasingly wary of inflation, fueled by higher energy costs stemming from the war in Iran. The Fed's decision to raise interest rates by 25 basis points on Wednesday and its indication that additional rate hikes might be necessary further contributed to the outflow trend.

US equity funds were particularly affected, with investors withdrawing a net $31.44bn, marking the fourth consecutive week of such withdrawals. Meanwhile, European equity funds saw net outflows of $295mn, while Asian equity funds attracted net inflows of $6.26bn. Despite the overall withdrawal from equity funds, weekly inflows into equity sector funds reached a six-week high of $4.49bn, driven by technology, financials, and consumer discretionary sectors.

Global bond funds saw inflows of $855mn, the smallest weekly amount since April 1, while investors withdrew $3.85bn from high-yield bond funds and $1.1bn from euro-denominated bond funds. In contrast, government bond funds and short-term bond funds attracted inflows of $2.96bn and $1.96bn, respectively. Money market funds recorded outflows of $77.42bn, ending a two-week streak of net purchases, with gold and other precious metals funds experiencing a notable $1.17bn inflow, marking their ninth weekly inflow in the past 10 weeks.