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Investors Are Favoring U.S. Stock Funds

U.S. equity funds enjoyed strong flows in May, while international-equity and taxable-bond flows tailed off.

U.S. equity funds enjoyed their strongest month since December 2016, collecting an estimated $20.7 billion in net inflows in May 2018. Taxable-bond funds followed with an estimated $14.4 billion in inflows, but this was down from April's $25.3 billion. Across all categories, passive funds, which include factor-based, strategic-beta offerings as well as market-cap-weighted index funds, received about $41.3 billion in inflows, while active funds had about $900 million in outflows. For the year to date through May, passive funds took in $207 billion versus just $2.1 billion for active funds.

Among U.S. equity funds, passive funds dominated their active counterparts, collecting $29.1 billion versus outflows of $8.4 billion for active funds. As has been true in years past, the exodus from active funds so far in 2018 roughly matches flows into passive U.S. equity funds. Year to date, active U.S. equity funds have had $72.8 billion in outflows versus $70.6 billion of passive U.S. equity inflows. Over the past 12 months, active U.S. equity funds have had outflows of about $195 billion versus passive inflows of $174 billion.

Other items of note:

  • Inflows to passive funds continued to outpace active funds, but market-cap-weighted passive funds have taken in far more than factor-based passive strategies.
  • International-equity inflows slowed for the fourth consecutive month to just $3.6 billion, the lowest level since November 2016, partly owing to emerging-markets outflows.
  • For the second consecutive month, iShares/BlackRock once again led all fund families. It had $14.9 billion in combined inflows in May. Vanguard followed with $10.7 billion. But year-over-year inflows have slowed for both firms.
Download the complete Asset Flows Commentary here.