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Commentary

Bond Funds and Vanguard Keep Taking in Cash

Investors continued to flock to fixed-income funds last month.

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Note: This is an excerpt from the Morningstar Direct U.S. Asset Flows Commentary for January 2020. Download the full report

Fixed-income funds continued to take in assets in January 2020, building upon a record 2019. Taxable-bond funds collected a record $63.6 billion for the month, surpassing the old record of $59.5 billion set the month before. Taxable-bond flows accounted for nearly 77% of the $82.8 billion that entered long-term funds in the period. Records fell for municipal-bond funds, too, as investors continued to hunt for sources of tax-free income.

The strong January marked 13 straight months of inflows into taxable-bond funds. Both actively and passively managed funds in the Morningstar Category benefited. Actively managed taxable-bond funds raked in $36.9 billion in January, their best showing since September 2009. Their passively managed counterparts added $26.7 billion.

Vanguard's $42.8 billion haul in January was its second-highest tally of long-term assets ever; in January 2017, it took in $46.0 billion. With nearly $5.4 trillion of long-term assets in its open-end funds and exchange-traded funds, Vanguard is the largest fund family, capturing more than a fourth of market share (compared with just 10% in 2000). A couple of its broad index funds powered the firm's impressive flows in January. Vanguard 500 Index (VFIAX) had $7.1 billion of inflows--the most for any single fund for which Morningstar collected data in January--followed by Vanguard Total Bond Market Index's (VBTLX) $5.4 billion. 

Invesco topped the list of firms with the heaviest outflows as it struggled to digest its acquisition of Oppenheimer. Invesco's funds saw an estimated $2.8 billion in net redemptions in January. The firm has had net outflows in 14 of 16 months since it announced its merger with Oppenheimer in October 2018. 

Tony Thomas does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.