U.S. ETF and mutual fund investors favored bonds over stocks and domestic over international while continuing a long-term trend towards passive management in July.
According to Chicago-based Morningstar, $32.1 billion flowed into U.S. open-ended, long-only funds in July, compared to $22.1 billion in outflows during June.
Actively managed funds experienced outflows in every Morningstar fund category except for taxable and municipal bond funds. Year-over-year, $527 billion has flowed into passive funds while $39 billion has flowed out of active funds. Active funds’ total market share across all groups declined 2.2 percentage points, from 64.6 percent in July 2017 to 62.4 percent in July 2018.
On a year-over-year basis, $489 billion flowed into long-only mutual funds and ETFs as of July 31, with taxable bond funds the leading category group, accounting for $302 billion of inflows, followed by international equity, which experienced $169 billion in inflows. Asset allocation funds experienced $32 billion in outflows during the same period, while nearly $11 billion flowed out of U.S. equity funds.
The leading category group in July was taxable bond funds, which experienced $24.8 billion in inflows during the month, more than two-thirds of which flowed into passive funds.
Investors placed $14.1 billion into passive equity funds in July after pulling $3.7 billion in June. At the same time, active funds experienced $11.2 billion in outflows in July, compared with $17.1 billion in June outflows.
Ultra-short bond funds experienced the most inflows, taking in $6.8 billion during July. The least popular categories were world large-cap stock and large-cap growth, each of which experienced about $3 billion in outflows.
Vanguard was the biggest recipient of fund flows, according to Morningstar, taking in $15.4 billion during July, followed by State Street, which experienced $10.5 billion of inflows. Active-heavy asset managers experienced net outflows for the month, led by Franklin Templeton Investments, which lost $2.8 billion, T. Rowe Price, which shed $1.2 billion in assets, and Invesco, which experienced $637 million in outflows.
During July, the SPDR S&P 500 ETF (SPY) took in the most inflows, $6.6 billion, followed by the Vanguard Total International Stock Index Fund (VGTSX), which took in $4.8 billion. Global and ex-U.S. funds experienced high outflows, with the iShares MSCI Emerging Markets ETF (EEM) and the JPMorgan Global Research Enhanced Index Fund (JEITX) each losing $1.4 billion. Investors also withdrew a combined $1.3 billion from the Metropolitan West Total Return Bond Fund (MWTIX).
Year-over-year, Vanguard remains the largest gatherer of assets, adding $226.1 billion to its funds, followed by BlackRock’s iShares, which experienced $122.3 billion of inflows. The firms experiencing the largest outflows year-over-year were Franklin Templeton, which saw investors pull $32 billion from its funds, and T. Rowe Price, which had $6.1 billion in outflows.