Investors Shy Away from Equities, Embrace Bonds in August

Taxable bond remained the leading category group in August with $27.5 billion in flows overall.

Unlike in June and July, however, active taxable-bond flows surpassed passive ones: $14.1 billion versus $13.3 billion.

For U.S. equity, active outflows were larger in August than in July, and passive inflows were smaller. International equity experienced inflows on both the active and the passive sides, but both were smaller than in the previous month. Investors shied away from both U.S.- and international-equity funds as stock market performance was hampered by underwhelming corporate earnings, headlines from North Korea, and continued unrest in Washington.

Intermediate-term bond was the top-flowing Morningstar Category in August, up from second place the previous month. Foreign large blend fell from first to second place. Diversified emerging markets retained fourth place as performance remained strong--28.3% for the year to date. Large blend, however, did not make it to the top five in August, reflecting the waning interest in U.S. equity.

Other trends in August included:

• Large growth and large value landed on the bottom-flowing list last month, dragged down by heavy withdrawals from active funds. High-yield bond also landed on the bottom-flowing list in August.

• Only Vanguard, SPDR State Street, and PIMCO received inflows on the active side in August.

• PIMCO has been the main beneficiary of the sustained taxable-bond flows in the past year. On the passive side, Vanguard is still the undisputed leader, with BlackRock/iShares in second place and Fidelity becoming a stronger contender after multiple rounds of fee cuts.

• The two funds with the highest inflows were the same in August as in July: PIMCO Income (PIMIX) and Oakmark International (OAKIX). The passive front was dominated by Vanguard funds and  iShares Core S&P 500 ETF (IVV).
  
  

Download the complete Asset Flows Commentary here.