As we know, 2020 was a crazy year for the financial markets. Not surprisingly, the world of investment funds reflected that topsy-turviness as some investment vehicles, investment categories and fund companies emerged as winners while others took it on the chin. 

According to fund research company Morningstar, exchange-traded funds experienced record inflows of $502 billion last year, and within that space taxable-bond ETFs led all categories by attracting $195 billion.

On the other hand, mutual funds saw record outflows of $289 billion, topping the prior net outflows record of $169 billion in 2018. Even so, mutual funds still hold more than three times the assets of ETFs.

This demarkation of ETFs and mutual funds aside, most of Morningstar’s analysis aggregated both product categories into one big pile of flows data. As such, Morningstar found that long-term mutual funds and exchange-traded funds together saw inflows of $212 billion for the year. That fell far short of the $356 billion average annual inflows from 2010 through 2019.

“Mutual funds never really recovered from the beating they took in March, when investors yanked a record $336 billion from them,” according to a Morningstar report. It added that investors’ desire for low-cost ETFs has put a big hurt on actively managed mutual funds.

Morningstar noted that 2020 was a record year for both ETF launches and closures, and that the industry overall grew assets at an 11% year-over-year organic growth rate, which measures the percentage change in assets due to flows rather than rising/falling security prices.

Among asset categories, total U.S. equity funds among ETFs and mutual funds experienced outflows of $241 billion, or four times the prior record from 2015. Within that segment, large-growth equity funds had $66 billion of outflows in 2020, marking the 17th consecutive year of outflows.

Meanwhile, taxable-bond funds gathered a record $441 billion in assets. That included annual record inflows in the intermediate core, high-yield, and corporate bond categories.

In the end, though, the U.S. equity category is still king with year-end 2020 assets of nearly $11 trillion, followed by the taxable-bond category at $5.1 trillion. International equity is third at roughly $3.8 trillion.

In all, the long-term funds universe tracked by Morningstar had $23.6 trillion in assets as of December 31. That comprises $13.6 trillion in active funds and nearly $10 trillion in passive funds. In terms of asset flows, active funds saw outflows of $188 billion and passive funds enjoyed inflows of $400 billion last year.

Fund Companies
Morningstar data shows that Vanguard was tops among the 10 largest U.S. fund families with inflows of $140.6 billion in 2020. iShares was second at $122 billion, and others on the top 10 list with positive flows were, in descending order, J.P. Morgan, SPDR State Street Global Advisors and Fidelity Investments.

Dimensional Fund Advisors saw the largest outflows among this group at $37 billion. Close behind in outflows were T. Rowe Price and American Funds, followed by Franklin Templeton Investments and Invesco.