Vanguard's first outflows in 20 years

Last month's mass exodus out of bonds left The Vanguard Group Inc. with its first month of net outflows in almost 20 years. Investors pulled $9.7 billion out of Vanguard bond funds last month, which just outpaced the $9.6 billion that went into stock and money market funds, leaving the company with $100 million in withdrawals, according to spokeswoman Katie Henderson. It was the first month of net withdrawals for Vanguard since December 1994. Excluding money market funds, it was the first since October 2008, according to Morningstar Inc. The $110 billion Vanguard Total Bond Market Index Fund, its largest bond fund, lost 1.64% in June as interest rates continued to jerk upward, ending the month at 2.52%, up from 2.13%. The Total Bond Market Fund (VBTLX) was down just over 3% year-to-date through July 8, according to Vanguard's website.

POPULAR FUND FAMILY

The net outflows come as a bit of a surprise, given just how popular Vanguard has been with investors since the financial crisis. In all, Vanguard has taken in more than $500 billion in new investments since the beginning of 2009, or more than a quarter of all fund flows over that time period, according to Morningstar. Vanguard wasn't alone in feeling the pinch from rising interest rates, though. In fact, no bond funds seemed to be safe in this environment. Pacific Investment Management Co. LLC, the world's largest bond company, saw investors pull out $14.5 billion, its first net withdrawals since December 2011. Pimco had been second only to Vanguard in net inflows since 2009, with $276 billion in deposits, according to Morningstar. In total, investors pulled $60 billion out of bond funds last month, according to the Investment Company Institute. It was the first month of net outflows since August 2011 and almost 50% more than the previous record of $41 billion in outflows in October 2008.