World Economy

Investors Pull Billions From Equity Funds

Investors Pull Billions From Equity FundsInvestors Pull Billions From Equity Funds

The worst start to a year for global financial markets sparked the biggest weekly outflow of cash from equity mutual funds since September.

Investors pulled $8.8 billion from funds that track stocks around the world, according to data collected by Cambridge, Massachusetts-based EPFR Global Inc., as the weakening of China’s currency rekindled concern that slowing growth there would spread. Redemptions at US-based stock funds hit at a 17-week high, with investors favoring funds that target Europe and Japan, where central banks have pledged continued support, data for the week ended Jan. 6 show, Bloomberg reported.

“As was the case in early 2015, mutual fund investors tip-toed rather than sprinted into the new year,” Cameron Brandt, research director at EPFR Global, and his colleagues wrote in a report released Friday. “Their caution was quickly justified as another spasm in Chinese equity markets rippled through global stock exchanges.”

The Standard & Poor’s 500 Index is on track for its worst-ever five-day start to the year and its worst weekly performance since the August equities selloff, while the MSCI All-Country World Index has plunged more than 5% this year. China spurred market turmoil amid renewed concerns that its sinking yuan reflects weakness in the world’s second-largest economy that could spread to other regions.

In the US, large-cap exchanged-traded funds saw the heaviest redemptions, according to EPFR. Meanwhile, nine of the 11 major US sector funds tracked by EPFR saw outflows during the period, with technology posting the most at $570 million. Industrial sector funds saw a fifth consecutive week of outflows, the most since early 2015.

In the second half of December, investors had pulled more money from US mutual funds than they have in any seven-day period in the past two and a half years.

Net redemptions reached $28.6 billion in the week ended Dec. 16, according to a statement from the Investment Company Institute, a trade group. It was the biggest weekly outflow since June 2013, ICI data show.

Some of the redemptions might reflect year-end tax-loss selling, which are sales made for tax purposes, ICI Senior Economist Shelly Antoniewicz said in the statement then.

Investors withdrew $11.1 billion from stock funds, $12 billion from bond funds and $5.6 billion from funds that buy a mix of stocks and bonds. Municipal bond funds attracted $647 million, the only category that saw inflows.

Mutual funds have experienced net redemptions every month since July, according to ICI data. In each of the first six months of the 2015, funds gathered money.