Bond funds see record $74B in net flows in May

Bond funds see record $74B in net flows in May
Equity funds suffered net outflows, according to Morningstar
JUN 17, 2020

A record $74 billion worth of net flows into taxable bond funds in May was the driving force behind the second straight month of positive flows into mutual funds and exchange-traded funds.

According to Morningstar, long-term mutual funds and ETFs, which excludes money market funds, had $33 billion in net inflows last month, in stark contrast to March’s record $326 billion in net outflows.

The reduced market volatility in May also slowed flows into money market funds to $31 billion. But money market funds have now taken in $1.1 trillion so far this year.

The appeal of taxable bond funds was largely attributed to investors hoping to catch a ride on the Federal Reserve’s unprecedented plan to start buying corporate bonds and bond ETFs.

In addition to taxable bond funds, sector equity strategies took in $8.5 billion in May, municipal bond funds took in $7 billion, commodity funds took in $4.6 billion, and alternative strategy funds had $1.4 billion worth of net inflows.

The biggest losers in May were domestic equity funds, which suffered net outflows of $29.6 billion, and international equity, with $27.5 billion in net outflows.

High-yield bond funds in particular have become a recent favorite of investors, with May marking the biggest month for net inflows into the category since $21.7 billion flowed into the funds in January 1999.

The $19.8 billion worth of net flows into high-yield bond funds in May followed $18.8 billion in April.

Among fund companies, The Vanguard Group was the big winner in May with $7.5 billion worth of net inflows, followed by State Street Global Advisors with $6.7 billion and JPMorgan with $6.1 billion.

Among the top 10 U.S. fund families, Dimensional Fund Advisors took the biggest hit in May, experiencing $3.8 billion worth of net outflows, followed by T. Rowe Price with $2 billion in net outflows.

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