We are already in June, and global equity markets are higher overall. But investors in mutual funds and similar entities aren't, it seems, ready to completely go back into the market just yet. New figures from Singapore underscore the gap between market performance and what end investors are actually doing.

It looks as though the troubles in global financial markets of 2023 created something of a hangover for the mutual funds industry in much of the world. And geopolitical turmoil, such as in the Middle East, China and Ukraine, have kept investors in a cautious mood even though equities in developed and emerging market countries have risen since January. 

A reminder of how cautious investors remain came yesterday in figures issued by the Investment Management Association of Singapore, or IMAS. Data showed that unit trusts registered for sale in the Asian city-state recorded net inflows of S$975 million ($721 million) for the first three months of 2024, partly reversing a net outflow of almost a S$1 billion in the preceding three months. However, in the equity portion of the report, investors still wanted to exit the market: a net outflow of S$172 million in Q1. Singapore had total net equity assets of almost S$95 billion at the end of March. (The data is issued in conjunction with Morningstar.) 

Notably, there were inflows on the bond and money market side, reflecting how the risk-free rate has risen alongside rises to local and global interest rates.

Switching to the US – the world’s largest economy – figures from the Investment Company Institute (ICI) show that net assets for all types of long-term US mutual funds fell by 3.7 per cent from March to April this year, reaching $20.06 trillion, but they were up from $18.3 trillion on April 2023. Within the equities category, assets fell to $10.714 trillion in April this year from $14.38 trillion in March, but were up from $13.113 trillion on a year ago.

According to LSEG Lipper, as far as Europe’s fund industry is concerned, money market and bond funds shone in the spring of this year, but equities are under a cloud.

Mutual fund inflows were €15.7 billion ($17 billion) and exchange-traded fund inflows were €11.4 billion. When broken down by asset, the cautious agenda shows itself for inflows: Bond funds (+€21.8 billion) were the best-selling asset type overall for April 2024. The category was followed by money market funds (+€20.6 billion), commodities funds (+€300 million), and real estate funds (+€100 million), while ”other” funds (-€200 million), alternatives funds (-€300  million), mixed-assets funds (-€7.1 billion), and equity funds (-€8.3billion) faced outflows.

So, regardless of geography, the pattern remains broadly similar – investors are hunkering down in the safety of money market and bond funds. While not turning their backs on stocks completely, they aren’t happy to shovel a lot of money into the equity market. And yet this situation is happening amidst a rising stock market. The MSCI World Index of developed countries’ equities shows total returns (capital gains plus reinvested dividends, in dollars) of 9.52 per cent since the start of January. The MSCI Emerging Markets Index shows returns of 3.41 per cent over the same period this year so far. 

What the data may suggest, then, is if or when some of the global risks decline, or are seen to do so, there is potentially a large amount of money that could re-enter equities, and unlisted equities.