Active U.S. Equity Funds Remain Also-Rans

April 2018 asset flows returned to form after the prior month's anomalies. Following two consecutive months of outflows, U.S. equity funds rebounded with estimated inflows of $6.8 billion. That rebound owed to passive U.S. equity funds resuming their dominance over their active counterparts, collecting $18.2 billion in inflows while active funds lost about $11.4 billion to outflows. Overall, trailing 12-month U.S. equity flows remain negative--to the tune of $42.6 billion, or a 0.6% decline.

Core large-blend funds were once again the most popular Morningstar Category by far, with $10.8 billion in inflows. To put this dominance in perspective, large-blend funds took in $14.4 billion for the year to date through April. The second most popular U.S. equity category was mid-cap blend funds, which collected about $200 million over the same period. The most popular fund year to date is  Vanguard Total Stock Market Index (VTSMX) with $19 billion in inflows, followed by  Vanguard 500 Index's (VFINX) $15.1 billion.

International equity funds remained more popular than their domestic brethren, pulling in about $11.1 billion. However, amid a volatile start to 2018, inflows did decline for the third consecutive month. Still, international equity funds enjoy the highest year-to-date organic growth rate, 2.72%, among the major asset categories.

Core foreign large-blend funds took in the lion's share of $5.6 billion, but diversified emerging-markets demand remained strong, with $4.5 billion in inflows. That's surprising given that emerging-markets equity funds have fallen 6.5% on average over the past three months, due in part to greater volatility and a strong U.S. dollar.

Taxable-bond funds fared even better in absolute terms, bringing in $25.3 billion, the second consecutive monthly increase and roughly on par with their trailing three-year run-rate. Ultrashort bond funds, which typically have average durations of less than one year, had the greatest inflows--$5.6 billion--as Federal Reserve interest-rate hikes boosted the yields on offer. iShares Short Treasury Bond ETF (SHV), which took in $2.5 billion in April, has a current SEC yield of 1.75%, although this is lower than the 1.85% for Vanguard Prime Money Market Fund .

A bit more surprising, the average intermediate-term bond fund took in nearly $5 billion in April, even as the typical fund in the group fell 1.93% for the year to date through April due to rising rates. Even more surprising, the long government category collected $3.4 billion, despite losing 2% on average in April alone and 5.3% year to date.

Meanwhile, short-term bonds didn't get much love from investors. Their flows were flat in April (although short-government funds did collect $1.0 billion), despite the average fund being down just 0.37% year to date, far better than the showing for intermediate-term or long-government funds. The same held true for municipal-bond funds. Muni national short funds had that group's greatest outflows ($1.4 billion), despite being down just 0.22% year to date. Conversely, muni-national long funds had less than $300 million in outflows, despite being down 1.7% year to date.

Download the complete Asset Flows Commentary here.