Investors Liquidate Equity Funds at Fastest Rate in 15 Years

(Reuters) – Investors liquidated equity funds at the fastest rate in 15 years in the week to Dec. 18, driven by caution and profit-taking in anticipation of a hawkish outcome from the U.S. Federal Reserve's policy meeting after a recent market rally.

According to LSEG Lipper data, investors divested a net $37.22 billion worth of global equity funds in the week, the largest amount for a single week since September 2009.

The Fed cut rates as expected on Wednesday and signaled fewer rate cuts while projecting higher inflation for next year, prompting a sell-off in global equities after Chair Jerome Powell emphasized the need for caution.

The MSCI World index has declined more than 3% this week and is set for its sharpest weekly fall in three and a half months.

Investors offloaded a robust $50.2 billion worth of U.S. equity funds, logging the biggest weekly net sales since September 2009. European and Asian funds, however, experienced $9.21 billion and $1.74 billion worth of net purchases.

Meanwhile, global sectoral funds experienced their largest weekly outflow in 14 weeks, totaling $2.65 billion, with the tech and healthcare sectors facing net disposals of $1.37 billion and $737 million respectively.

Global bond funds continued to attract investor interest for a 52nd consecutive week, securing about $2.36 billion in net purchases, albeit the lowest amount in eight months.

Corporate and loan participation funds drew substantial inflows of $2.01 billion and $1.12 billion, respectively. Meanwhile, government bond funds experienced $594 million in outflows, marking a third consecutive week of net sales.

Money market funds recorded about $51.02 billion in net sales, marking the fourth outflow in five weeks.

In the commodities sector, gold and precious metal funds saw $1.67 billion withdrawn, the largest since July 2022, while energy funds experienced $215 million in outflows.

According to data covering 29,603 funds, emerging market equities faced increased selling pressure, with equity funds recording their sharpest net outflow in about a year at $5.27 billion, and bond funds also seeing $710 million in net outflows.