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Morningstar
Commentary

Investors Remain Infatuated with Bond Funds in April

International-equity funds experience outflows, American Funds overtakes Fidelity in terms of assets, and the large-blend category enjoys inflows thanks to two funds.

Alina Lamy

Investors continued to gravitate toward fixed income for the third consecutive month in April. Taxable- and municipal-bond funds were the highest-receiving Morningstar category groups, with estimated net inflows of $22.8 billion and $5.9 billion, respectively. Taxable bonds received balanced inflows on both the active and passive side; municipal bonds received a majority of the inflows on the active side (not surprising, since there aren’t many passive municipal-bond fund options out there).

All the equity category groups (and allocation) sustained outflows in April on the heels of weak U.S. corporate earnings and a disappointing employment report, which fueled concerns that the U.S. economy might be losing momentum. Active equity funds once again bore the brunt of these outflows; all flows into passive equity funds were positive, although not large enough to drag the overall flows into positive territory.

International-equity funds posted their first outflow since October 2014. Even though this may be just another off month (like October 2014), international-equity flows, although positive, have been significantly decreasing and are now nowhere near the levels witnessed in the first half of 2015.

Other notable asset-flow trends include:

  • Intermediate-Term Bond and Large Blend were the two Morningstar Categories to experience the greatest inflows in April. Two funds, Vanguard Total Stock Market Index (VITSX) and  iShares MSCI USA Minimum Volatility (USMV), pulled the latter category up to second place, with inflows of $2.8 billion and $1.2 billion, respectively.
  • American Funds overtook Fidelity to become the second-largest fund family, behind Vanguard. Consistent inflows for American Funds and outflows for Fidelity prompted a reversal in the top 10 this month, with American Funds climbing to the second spot and Fidelity dropping to the third. American Funds and Vanguard were the only firms with sizable inflows on the active side in April.

    Access the full Morningstar U.S. Asset Flows Update here.

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