Bond Funds and Vanguard Keep Taking in Cash

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.