Global Equity Funds See 5-Week Low as AI Investment Concerns Rise

Global equity funds experienced their lowest inflows in five weeks, totaling $19.75 billion in the week ending February 25, as investors grew wary of rising investment costs in artificial intelligence (AI) technologies and potential market disruptions.

This slowdown coincided with a 5.46% drop in Nvidia's shares and a 1.2% fall in the Nasdaq Composite Index, following an earnings announcement that revealed a deceleration in fourth-quarter revenue growth, despite exceeding analysts' expectations, according to LSEG data.

UBS's Chief Investment Officer for Global Wealth Management, Mark Haefele, suggested that the significant market movements of recent months should prompt a re-evaluation of investment portfolios. He added that unexpected increases in capital expenditure and heightened competition have contributed to uncertainty in the AI sector, making selectivity and diversification more critical.

European equity funds saw weekly inflows of $11.69 billion, down from $18.61 billion the previous week. Asian and U.S. funds attracted net inflows of $3.22 billion and $2.01 billion, respectively.

Sector-specific data revealed mixed results, with industrial, metal, and mining sectors attracting net inflows of $1.5 billion and $1.02 billion, respectively. Conversely, the financial services and technology sectors experienced outflows of $2.55 billion and $257 million, respectively.

Bond fund inflows also declined to a five-week low of $12.68 billion, with short-term bond funds attracting $1.25 billion, the lowest weekly net inflow since January 21. Euro-denominated and corporate bond funds saw inflows of $2.2 billion and $1.4 billion, respectively.

Money market funds experienced their largest weekly net purchase in three weeks, at approximately $19.97 billion, signaling increased investor caution.

Gold and precious metals funds saw strong demand, attracting $5.57 billion in inflows, the highest since October 22.

Emerging market equity funds continued to attract investment for the tenth consecutive week, with net inflows of $11.86 billion. Bond funds saw inflows of $3.13 billion, according to data covering 28,718 investment funds.

U.S. equity funds experienced a notable slowdown in demand, with net purchases of $2.01 billion, compared to $11.76 billion the previous week, reflecting a clear deceleration in liquidity flows.

U.S. value funds continued to attract inflows for the third consecutive week, with a net of $630 million, while growth funds recorded net outflows of $3.53 billion, reflecting a tactical shift in investor preferences away from highly valued stocks.

Inflows into U.S. sector funds fell to a three-week low of $1.52 billion, with industrial, metal, mining, and technology sectors attracting net inflows of $904 million, $711 million, and $522 million, respectively. The financial sector experienced outflows of $2.26 billion.

Demand for bond funds fell to an eight-week low, with investors adding a net of $5.15 billion. Short- to medium-term investment-grade bond funds attracted $1.51 billion, while short- to medium-term government and treasury bond funds saw inflows of $1.12 billion. Municipal debt funds led the way, attracting $1.03 billion, the most attractive among U.S. bond categories.

Money market fund inflows rose to a three-week high of $21.21 billion, signaling increased caution and a preference for liquidity amid uncertainty in equity markets.