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Investors Flock to Ultrashort Bond Funds

Taxable-bond funds continued to enjoy the greatest inflows in August.

  • Long-term flows to U.S. open-end and exchange-traded funds dipped to an estimated $22.2 billion in August 2018 following July's $32.1 billion
  • Taxable-bond funds continued to dominate with $19.1 billion in inflows, although this was down from July's $25.2 billion. The ultrashort bond Morningstar Category was the most popular in the taxable-bond group for the sixth consecutive month, collecting $9.7 billion, the category's greatest haul in at least a decade.
  • Active-fund outflows continued, but active taxable-bond funds have slowed the pace of outflows in 2017 and 2018.
  • iShares led all families with $15.8 billion of inflows, followed by $8.0 billion for Vanguard.

Trends in Long-Term Asset Flows Continue
August's $22.2 billion in long-term flows takes the year-to-date tally to about $262 billion, a $33 billion monthly average. If that pace is maintained, 2018 will end with about $393 billion in long-term inflows. This would be in line with the $389 billion average seen from 2009 to 2017.

Taxable-bond and international-equity funds accounted for most long-term flows, with taxable-bond funds alone claiming almost two thirds of 2018 inflows, or $168 billion. For the sixth consecutive month, ultrashort bond was the most popular category in the taxable-bond group, with about $9.7 billion in inflows, the category's greatest inflows in at least a decade. It was followed by long-government funds, which collected about $2.1 billion in inflows.

International-equity flows were modestly positive at about $3.2 billion. While core-oriented foreign large-blend funds led with $3.2 billion of inflows, diversified emerging markets followed with an impressive $1.9 billion. U.S. equity funds saw nearly $1.4 billion in outflows overall. All three large-cap categories saw outflows, though the small- and mid-cap categories fared better. Small-blend and small-growth funds led U.S. equity flows, with about $2.0 billion each.

  Download the complete Asset Flows Commentary here.