US Fund Flows: August Flows Dip Amid Volatile Equity Market

US funds gathered just $26 billion in August, their lowest total since April. Two of the three equity category groups suffered outflows while the third was relatively flat. Flows into fixed-income funds and alternatives propped up the overall picture.

Outside of the usual flows into passive large-blend funds, US equity funds didn’t have much else going for them in August. The category group posted near-flat net flows thanks to outflows from six of the nine Morningstar Style Box categories, while mid-cap blend and small-value funds posted minor inflows. Passive funds in categories other than large-blend generally had subpar months relative to their pace so far in 2024.

The charts below illustrate which direction the money is flowing for a variety of fund types. For a more complete analysis, download the full monthly report from Morningstar’s Adam Sabban and Ryan Jackson.

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Let’s get into it.

Taxable-bond funds pushed their 2024 inflow over $300 billion after collecting $33 billion in August. Investors have piled into taxable-bond products of all stripes: active or passive, mutual fund or ETF. That broad demand has helped taxable-bond funds grow faster than the equity category groups, where outflows from active mutual funds have been hard to offset.

Investors have positioned for lower interest rates most of this year. That was especially true in August, when fresh economic data looked like surefire evidence that the Federal Reserve would cut interest rates in September. Long government-bond funds are sensitive to rate changes and raked in $7 billion, while bank-loan funds often used as inflation hedges endured nearly $5 billion of outflows.

Municipal-bond funds collected roughly $6 billion in August, exceeding $5 billion of inflows in consecutive months for the first time in three years. Key to the success: high-yield municipal-bond funds, which gathered $2 billion in August and more than $10 billion in 2024 so far. They represented about 14% of the municipal-bond fund cohort entering 2024 but claimed 38% of its net flows since then.

For more comprehensive analysis and commentary on US Fund Flows, download this month’s full report. Additional topics include:

• The End of an Era: JEPI Flips to Outflows
• International-Equity Funds Stumble in August
• Sustainable Funds Approach Asset High-Water Mark, But Merely Due to Appreciation
• State of ETF Affairs

Can’t get enough fund flows data? Check out Morningstar’s Ultimate Guide to Fund Flows.

This article is adapted from the Morningstar U.S. Fund Flows report for June 2024. Download the full report here.

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