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February Unlocked the Best Monthly Flows for US Funds Since 2021

Bond funds headlined a strong month for US fund flows.

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US mutual funds and exchange-traded funds hauled in $59 billion in February 2024, their highest monthly total in more than two years.

Long-Term US Fund Flows

Bar chart of monthly flows for US funds.
Source: Morningstar Direct Asset Flows. Data as of Feb. 29, 2024.

Taxable-Bond Funds Stay Hot

Taxable-bond funds raked in more than $50 billion in February, good for a 1% organic growth rate. The $97 billion they’ve collected in 2024 marks their best two-month stretch since April-May 2021. Active taxable-bond strategies pulled in $29 billion in February, enough to push the broad active fund universe into inflows for the first time in more than two years.

Taxable-Bond Organic Growth Rates

Bar chart of quarter organic growth rate for active and passive taxable-bond funds.
Source: Morningstar Direct Asset Flows. Data as of Feb. 29, 2024.

Active Bond Funds Round Into Form

Investors have not shied away from credit risk in 2024. That is good news for active funds because they dominate credit-forward Morningstar Categories like intermediate core-plus, high-yield, and multisector bond. Meanwhile, flows into the passive-heavy government-bond categories have tapered after excellent 2022 and 2023 campaigns.

Taxable-Bond Flows

A  table of the assets, flows, and organic growth rates across the five largest bond categories.
Source: Morningstar Direct Asset Flows. Data as of Feb. 29, 2024.

US Equity Funds Don’t Move the Needle

Net flows into US equity funds were basically flat in February. Over the past two years, this cohort has relied on huge flows into large-blend funds to cover for the other categories. Excluding large blend, the category group has been in outflows for 21 straight months. Large-growth funds were the main culprit in February with a $6 billion exodus, though small-value funds hauled in $2 billion.

US Equity Flows

Stacked bar chart of U.S. equity fund flows.
Source: Morningstar Direct Asset Flows. Data as of Feb. 29, 2024.

Don’t Mess With Tech

Including more than $3 billion of February outflows, sector-equity funds have bled $48 billion over the past 12 months. Don’t blame technology funds, though. They absorbed $18 billion over that span, including nearly $9 billion so far this year. Funds targeting the red-hot semiconductor industry have excelled, like VanEck Semiconductor ETF SMH, which has hauled in nearly $2 billion in 2024.

Sector-Equity Flows

Stacked bar chart of monthly sector-equity flows.
Source: Morningstar Direct Asset Flows. Data as of Feb. 29, 2024.

The Digital Dash Continued in February

Newly minted spot bitcoin ETFs powered the alternatives cohort to its best month since January 2022. The “new nine” bitcoin ETFs that debuted in January collectively raked in $8.5 billion in February, led by the iShares and Fidelity products. Some of that money came out of Grayscale Bitcoin Trust GBTC, the trust-turned-ETF whose market share has waned since the new competition arrived.

Bitcoin ETF Flows

Table of spot bitcoin ETFs’ February and year-to-date net flows.
Source: Morningstar Direct Asset Flows. Data as of Feb. 29, 2024.

This article is adapted from the Morningstar Direct US Asset Flows Commentary for February 2024. Download the full report here.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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