Investors Direct Fund Flows Into Low-Risk Offerings
Investors continued to cut risk in October 2019, despite low yields and strong equity returns.
Investors continued to cut risk in October 2019, despite low yields and strong equity returns.
Note: This is an excerpt from the Morningstar Direct U.S. Asset Flows Commentary for October 2019. Download the full report.
The Federal Reserve cut rates at the end of October for the third time in 2019; and on Oct. 31, the 10-year Treasury bond had a yield of just 1.74%. But despite lower yields, money market inflows still overwhelmed long-term inflows, at $75.3 billion versus $29.0 billion.
Some commentators see these huge money market flows as potential fuel for the U.S. equity bull market. After all, money market assets are the highest they've been in at least 10 years at $3.5 trillion. But a mass move into U.S. equities seems unlikely, at least via open-end funds and exchange-traded funds. That's because, despite one of the longest bull markets in U.S. history and a 13.7% annualized 10-year return for the S&P 500, U.S. equity funds--both active and passive--collected just $59.8 billion during the decade. To put that in perspective, international-equity funds collected $997.3 billion during the same period, although demand for those funds has dropped significantly in recent years.
Signs of risk aversion also surfaced in the significant inflows into taxable-bond and municipal-bond funds, at $41.5 billion and $8.4 billion, respectively. This trend aligns with what we observed from a volatility perspective: Investors contributed $40.4 billion to the least-volatile quartile of long-term funds while pulling $14.3 billion from the most-volatile quartile.
When dissecting fund flows by fund families, although Vanguard had modest inflows of $9.9 billion, it continues to eat up market share. Its total open-end and ETF assets passed $5 trillion in October. Vanguard's 25.6% market share is greater than that of its next three biggest competitors combined.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.