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Bond Funds Dominate in 2019 Fund Flows

Investors pour more than $500 billion into taxable- and municipal-bond funds.

Note: This is an excerpt from the Morningstar Direct U.S. Asset Flows Commentary for the year 2019. Download the full report.

  • With their strongest inflows of the year in December, long-term funds collected $414.6 billion in 2019, more than double 2018's $168.3 billion. Money market flows were even better, receiving $547.5 billion in inflows, the group's best year since 2008's record $593.6 billion. Thanks to rising markets, long-term assets grew to $20.7 trillion from $16.9 trillion.
  • The strong long-term inflows owed almost entirely to record inflows for both taxable-bond and municipal-bond funds, which collected $413.9 billion and $105.5 billion, respectively. With greater 2019 flows than their active counterparts, passive taxable-bond funds now have a third of that market.
  • Despite the S&P 500 gaining 31.5% in 2019, U.S. equity funds had $41.4 billion in outflows, the sixth year of net outflows during the decade-long bull market. Meanwhile, passive funds finished the year with a 51.2% share of the U.S. equity fund market based on total assets.
  • December was Vanguard's best month of the year with inflows of $22.3 billion, which led all firms. Its $183.3 billion in 2019 inflows topped 2018's $162.9 billion, but it was still down from levels hit in 2014 through 2017. Thanks to rising markets, the firm's long-term assets grew by $1.1 trillion to $5.3 trillion--a 25.7% market share.
  • IShares came in second with $119.3 billion in 2019 inflows, but this was the firm's second consecutive drop in year-over-year inflows.

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