Investors withdrew money from global bond and equity funds in the week ended September 21, with caution creeping in ahead of the U.S. Federal Reserve meeting in which further rate hikes were expected to tame soaring inflation.
Investors exited a net $7.32 billion of global bond funds, marking their biggest weekly net selling since Aug. 31, data from Refinitiv Lipper showed.
GRAPHIC: Fund flows: Global equities bonds and money market https://fingfx.thomsonreuters.com/gfx/mkt/dwvkrxorjpm/Fund%20flows-%20Global%20equities%20bonds%20and%20money%20market.jpg
The Federal Reserve raised its benchmark rate by 75 basis points on Wednesday, the third such rise in a row, and officials project rates hitting 4.4 per cent this year, which was 100 bps higher than what the Fed had projected three months ago.
"Sooner or later bond yields will peak, though timing this precisely is difficult. The market is currently expecting the terminal US fed funds rate to be reached by around March-June 2023," said Bimal Patel, senior fund manager at Canada Life Asset Management.
Global short- and medium-term bond funds saw their biggest weekly outflow in 11 weeks, amounting to a net $4.98 billion, while investors also exited a net $3.29 billion in high yield funds.
GRAPHIC: Global bond fund flows in the week ended Sept. 21 https://fingfx.thomsonreuters.com/gfx/mkt/lbpgnkqgovq/Global%20bond%20fund%20flows%20in%20the%20week%20ended%20Sept%2021.jpg
Meanwhile, global equity funds witnessed disposals worth $1.86 billion in a fifth straight week of net selling.
Financials and consumer staples lost $1.55 billion and $687 million respectively in outflows, but utilities and tech both obtained about $300 million worth of inflows.
"Energy, financials, and materials are still attractively valued when compared to the rest of the US equity market. Valuation multiples of these companies remains low, and they remain to be beneficiaries of the prolonged inflation and interest rate rising environment," said Eugene Barbaneagra, portfolio manager at SEI.
GRAPHIC: Fund flows: Global equity sector funds https://fingfx.thomsonreuters.com/gfx/mkt/zjpqkrxkopx/Fund%20flows-%20Global%20equity%20sector%20funds.jpg
On the other hand, safer money market funds attracted investor interest as they obtained a net $28.23 billion, the biggest weekly inflow since July 6.
Data for commodities funds showed precious metal funds remained out of favour for a 13th week with net disposals worth $474 million. Investors also exited energy funds of $60 million.
An analysis of 24,559 emerging market funds showed investors sold $2.39 billion worth of equity funds, marking a 10th weekly outflow in a row, while also exiting $2.78 billion worth of bond funds.
GRAPHIC: Fund flows: EM equities and bonds https://fingfx.thomsonreuters.com/gfx/mkt/xmpjoazoqvr/Fund%20flows-%20EM%20equities%20and%20bonds.jpg