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Investors Prefer Bonds

Taxable bond funds remained popular last month, and the sector equity category group took a surprising second place.

Despite expectations of rising rates, taxable bond was once again the most popular category group in September with $34.9 billion inflows overall, significantly higher than the $27.5 billion it had received in August. In a reversal from the previous month, passive taxable-bond flows surpassed active ones: $20.5 billion versus $14.4 billion.

After sustaining a $4.2 billion outflow in August, sector equity enjoyed a $10.5 billion inflow in September, driven by the real estate Morningstar Category (and one recently launched fund in particular, Vanguard REIT II Index VRTPX). International equity received diminished flows ($9.8 billion compared with $16.1 billion the previous month), following some unrest in Europe sparked by Brexit news and the call for Catalan independence from Spain.