Global equity funds witnessed their first weekly outflow in nine weeks during the week ended May 20, as investors turned cautious amid mounting inflation concerns and a sharp rise in long-term borrowing costs, according to Reuters, citing LSEG Lipper data.
Investors pulled a net $6.13 billion from global equity funds during the week, marking a reversal from the steady inflows seen since mid-March. The retreat in risk appetite came as bond yields surged globally, driven by fears that geopolitical tensions in the Middle East could keep energy prices elevated and inflation stubbornly high.
The 30-year U.S. Treasury yield climbed to 5.201% during the week, its highest level since 2007, before easing slightly. The jump in yields reflected growing investor unease over the inflationary impact of the ongoing conflict involving Iran and the broader uncertainty surrounding a potential resolution.
U.S. equity funds bore the brunt of the selling pressure, recording net outflows of $12.05 billion, their second weekly withdrawal in the past three weeks. Asian equity funds also saw modest outflows of $570 million. In contrast, European equity funds continued to attract investor interest, drawing net inflows of $4.62 billion during the week.
Sectoral trends showed investors maintaining a preference for technology-focused funds despite the broader market caution. Technology sector funds attracted net inflows of $6.94 billion, extending their winning streak to seven consecutive weeks as enthusiasm around artificial intelligence and resilient earnings continued to support the sector.
However, other cyclical sectors faced pressure. Financial sector funds witnessed weekly outflows of $2.8 billion, while industrial sector funds recorded withdrawals of $1.3 billion, reflecting investor concerns over higher interest rates and slowing global growth momentum.
While equities struggled, global bond funds continued to benefit from defensive positioning. Investors purchased a net $21.89 billion worth of global bond funds, marking the seventh straight week of inflows. Reuters reported that short-term bond funds attracted the largest share of inflows at $7.47 billion, followed by government bond funds at $3.09 billion and euro-denominated bond funds at $1.68 billion.
Money market funds also returned to positive territory with net inflows of $1.06 billion after witnessing sizable withdrawals in the previous week. Investors appeared to be rebuilding cash positions amid heightened market volatility and uncertainty over the direction of interest rates.
Safe-haven demand remained evident in commodity markets as well. Gold and precious metals funds drew net inflows of $2.34 billion for a second consecutive week, supported by concerns over geopolitical risks and inflation pressures.
Emerging markets continued to face sustained investor selling. Emerging market equity funds recorded net outflows of $2.95 billion, extending their losing streak to four straight weeks. Emerging market bond funds also saw withdrawals of $256 million, ending a six-week run of inflows.
The latest fund flow data underscores how rising borrowing costs, persistent inflation concerns, and geopolitical uncertainty are beginning to weigh on investor sentiment globally, even as selective areas such as technology and safe-haven assets continue to attract capital.
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