Global equity funds draw big inflows ahead of Fed rate cut

(Reuters) – Global investors scooped up equity funds in the week to Sept. 18, anticipating the Federal Reserve’s interest rate cut to initiate its long-awaited reduction cycle.

According to LSEG data, investors acquired a net $5.21 billion worth of equity funds during the week following $6.54 billion worth of net purchases in the week before.

The U.S. Federal Reserve cut its benchmark policy rate by an unexpectedly hefty 50 basis points, which bolstered riskier assets around the world, including stocks and commodities.

Asian equity funds attracted net investments for the 16th consecutive week, totaling approximately $2.77 billion. European funds also saw significant inflows, drawing $3.29 billion net investments, while net sales in US funds decreased to a four-week low of $1.37 billion.

Sector funds experienced net withdrawals for the third consecutive week, totaling approximately $1.2 billion. The financials and tech sectors led these outflows, with net sales of $950 million and $606 million, respectively.

Investors divested about $16.06 billion worth of money market funds after a six-week net buying streak, underpinning the rise in investor risk appetite.

Global bond funds attracted inflows for the 39th consecutive week, garnering a net $11.24 billion.

Global short-term bond funds received $2.3 billion, following net purchases of $2.65 billion a week earlier. High-yield funds also drew $1.71 billion in inflows, although investors withdrew about $218 million from government bond funds.

Gold and other precious metal funds maintained their appeal for a sixth consecutive week, attracting about $544 million in net purchases, while energy funds reversed a four-week inflow trend, with net sales amounting to $129 million.

Data covering 29,544 emerging market funds showed equity funds experienced a 15th weekly outflow at a net $293 million. In contrast, bond funds secured $416 million, posting a 13th successive week of inflows.