U.S. Equity Fund Flows Cool Down in April
Investors favor international equities and fixed income.
|Editor's note: This is adapted from the Morningstar Direct U.S. Asset Flows Commentary for April 2021. Download the full report here.|
Following a record $156 billion intake in March, long-term mutual funds and exchange-traded funds collected $124 billion during April. Investors continued to favor passively managed strategies, pouring in $94 billion. About $30 billion went to actively managed funds. Broken down by investment type, ETFs--most of which are passively managed--gathered $75 billion, while open-end mutual funds pulled in about $49 billion.
After taking in a record $54 billion in March, U.S. equity funds quieted down in April, shedding about $500 million. Large-blend funds saw the biggest month-over-month change, with roughly flat net flows in April after collecting $25 billion in March.
International-equity funds took in $31 billion in April, matching their total from March. Funds in the newly established world large-stock blend Morningstar Category took in more than $11 billion, a record in Morningstar data going back to 1993. Much of that total, however, went to two American Funds vehicles, American Funds Global Insight (AGVDX) and American Funds Capital World Growth and Income (CWGIX), which together received more than $10 billion in new assets as a result of changes to American Funds' target-date fund allocations. Diversified emerging-markets funds took in $7 billion in April, but that was about half of their record $14 billion inflow in March.
Taxable-bond funds picked up $65 billion in April, bringing their trailing-12-month total to $816 billion. Bank-loan and inflation-protected bond funds added on to their torrid first quarter, picking up $5.8 billion and $5.5 billion in April, respectively. The two categories experienced the highest organic growth rates within the category group for the year to date as investors sought fixed-income funds that can better handle a period of rising interest rates.
Intermediate core bond funds took home the most of any category with $18.4 billion of inflows. They have gathered $233 billion over the trailing 12 months, representing an impressive 23% organic growth rate. Foreign large-blend funds took in $9.7 billion, driven by inflows to passive strategies.
Three of the five categories shedding the most assets invest in growth-oriented equities, which posted lower returns than their value counterparts through the first four months of 2021. Investors might be taking profits following strong growth-stock returns in 2020 and shifting to more economically sensitive segments that are leveraged to benefit from the ongoing recovery.
Value funds, by contrast, have seen a resurgence in investor interest during 2021. Following a month of record inflows in March, value funds collected smaller but still significant totals in April. Large-value funds raked in about $4 billion, down from $20 billion in March, but still good for their fourth-consecutive month of inflows.
After 69 consecutive months of outflows, allocation funds have now posted two consecutive months of inflows. April's $3.7 billion intake was their highest since March 2015. Another American Funds' target-date reallocation explains some of the month's increase, as American Funds American Balanced (ABALX) took in $5.5 billion. However, flows into the category group were still positive even when excluding that development. Balanced funds from prominent firms such as Vanguard, Fidelity, and T. Rowe Price collected the largest totals outside of American Funds American Balanced.
Firms focused on passively managed funds took home the greatest inflows among the largest fund families, although two primarily active shops held their own. Vanguard, the largest U.S. firm by total assets, collected roughly $44 billion in April, 89% of which went into passive funds. IShares came in second with $16 billion of inflows, primarily accruing to its index-tracking ETF lineup. Fidelity and SPDR State Street Global Advisors each took in more than $5 billion, powered by their passive fund businesses.
Fund families offering primarily active strategies saw some positive signs, too. American Funds took in $4.8 billion, driven by flows into its taxable-bond and international-equity funds. J.P. Morgan extended its streak of inflows to 12 consecutive months, gathering $3.6 billion in April, with the majority of that going to its actively managed funds. Notably, Franklin Templeton experienced inflows for just the second month since April 2015, taking in a modest $199 million.
Note: The figures in this report were compiled on May 12, 2021, and reflect only the funds that had reported net assets by that date. Artisan had not reported. Morningstar Direct clients can download the full report here.
Adam Sabban does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.