Investors Take $39B of Global Equity Fund Assets

Investors divested equity funds on a large scale in the week to September 17 to lock in profits as an extended record-setting rally in global stocks amid an interest rate cut by the Federal Reserve raised investor caution around the stock market's lofty valuations.

Investors disinvested a net $38.66 billion worth of global equity funds during the week in their biggest weekly net sales since at least 2020, data from LSEG Lipper showed.

"There are reasons to be mindful. Current valuations are high compared to long-term averages," said Mark Haefele, Chief Investment Officer at UBS Global Wealth Management. The MSCI World Index has so far rallied around 35.9% since hitting nearly a 1-1/2 year low of 722.57 on April 7, pushing its forward 12-month price-to-earnings ratio to a more than 4-year high of 19.9.

"After such a strong recent run, a period of consolidation should not come as a surprise, in our view," UBS's Haefele said.

Investors withdrew a massive $43.19 billion from U.S. equity funds, the largest amount for a week since $50.62 billion worth of net sales in mid-December 2024.

Asian and European equity funds, however, received a net $2.23 billion and $1.25 billion worth of weekly investments, respectively.

Equity sectoral funds had a mixed set of data as the technology sector saw $3.1 billion net sales while investors snapped up industrials, and gold and precious metals sector funds of $2.06 billion and $722 million, respectively.

Weekly net inflows in global bond funds, meanwhile, eased to a 10-week low of $12.2 billion during the week.

Government bond funds still saw a surge in demand as they received $2.75 billion, the largest amount in 17 weeks. High yield bond funds also received a significant $2.48 billion.

Meanwhile, money market funds saw a net $9.12 billion outflow following two successive weeks with close to $60 billion inflows.

Gold and precious metals commodity funds saw a net $1.69 billion weekly investment, with inflows now recorded for 16 of the last 17 weeks.

In emerging markets, equity funds were popular for the fifth successive week as they received a net $2.75 billion weekly inflow. Investors also scooped up bond funds of a net $850 million, data for a combined 29,666 funds showed.