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Fund Spy

Investors Show Willingness to Buy Untested Funds

Looking at 10 years of fund flows through the lens of volatility.


Investor sentiment may be swinging toward risk aversion. The Volatility Index, or VIX, is up more than 8% in July, although it's still down 8.5% for the year. There's certainly enough to make investors nervous, between high asset prices and geopolitical instability. This risk aversion is starting to show in open-end fund flows too, especially within the more-aggressive categories. (We left out exchange-traded funds for this analysis because they sometimes are used more as trading vehicles than open-end funds.)

High-yield bond funds had nearly $500 million in June outflows--the category's first net outflows in 10 months. Once-popular bank-loan funds are seeing an even greater exodus with about $6 billion in second-quarter outflows. The shift shows in U.S. small-cap equity funds too. Small-blend funds had nearly $800 million in June outflows while small-growth funds had an even greater $1.3 billion in outflows with about $4.2 billion migrating in the second quarter overall.

Kevin McDevitt does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.