Feb 20 - Global equity funds registered their strongest weekly inflow since January 14, drawing $36.33 billion in the seven days to February 18, according to LSEG Lipper data. The rise in demand coincided with a reduction in investor concern about artificial intelligence-focused stocks and a rotation of capital into other market sectors, while expectations for Federal Reserve rate cuts supported sentiment toward U.S. growth.
U.S. consumer price data released last Friday showed inflation increased 2.4% year-on-year in January, close to market expectations of a 2.5% rise. That reading reinforced market assumptions of two Federal Reserve rate reductions this year, a factor market participants cited as lifting risk appetite and supporting flows into equities.
Regional fund flows were led by Europe, where funds attracted $17.22 billion during the week, broadly matching the prior week’s $17.68 billion of inflows. The STOXX 600 index reaching a record high provided additional support for investor interest in European equities.
U.S. equity funds reversed the prior week’s outflow, recording net inflows of $11.77 billion after suffering a $1.48 billion withdrawal the week before. Asian funds also saw positive net purchases, pulling in $3.8 billion over the seven-day period.
At the sector level, demand was concentrated in industrials, metals and mining, and technology funds, which attracted weekly net inflows of $1.82 billion, $818 million and $696 million, respectively. These sector flows indicate a broadening of investor interest beyond headline tech names.
Fixed income and cash management vehicles continued to attract money. Global bond funds posted a seventh consecutive week of net inflows, taking in $19.79 billion. Short-term bond funds drew $5 billion, their largest weekly intake since December 24. Euro-denominated bond funds and corporate bond funds recorded net purchases of $2.54 billion and $2.35 billion, respectively. Money market funds extended an inflow streak to four weeks with $7.05 billion of new money.
Precious metals funds bucked the broader inflow trend, with gold and precious metals vehicles seeing net outflows of $1.86 billion, ending a five-week run of inflows.
Emerging market funds remained a focus for investors. Emerging market equity funds attracted $8.1 billion during the week, lifting year-to-date inflows into EM equities to $56.52 billion. Emerging market bond funds also recorded net purchases for a second consecutive week, drawing $1.94 billion. The flow data cover 28,639 funds.
"While the recent underperformance of U.S. tech stocks relative to emerging markets echoes the eve of the dotcom bust, we think the AI rally still has a bit further to run," said Elias Hilmer, market economist at Capital Economics. "That said, if the AI bubble bursts, we think equities in EMs would hold up better than in the U.S."
The flows data show investors reallocating across regions and sectors as inflation readings and rate-cut expectations influence asset allocation decisions. The week’s activity underscores continued appetite for both risk assets and shorter-duration fixed income, while safe-haven precious metals experienced renewed selling pressure.