Investors Add $38.6 Billion to Mutual Funds

The report, “Morningstar Direct U.S. Open-End Asset Flows Update,” shows inflows were led by taxable-bond funds with $21.1 billion. Morningstar estimates net flow by computing the change in assets not explained by the performance of the fund.

Despite investors’ continued preference for fixed income, the composition of inflows to the asset class has shifted. Weak flows into intermediate-term bond funds mark a clear shift in investor behavior from 2012, when the category dominated inflows. Investors have sought out less interest rate-sensitive bond sectors recently, like nontraditional bond and bank-loan funds, Morningstar said.

U.S. equity funds saw outflows of $659 million in May, driven by redemptions of $1.9 billion from large-growth funds. However, with inflows of $8.5 billion, international-equity funds remained in favor, led by diversified emerging-markets funds.

Municipal-bond funds saw net redemptions for the third consecutive month while money market funds collected new assets of $27.2 billion, their first monthly inflow of 2013.

Vanguard led all providers in May. Franklin Templeton also had a strong month, driven by inflows into Templeton Global Bond. While PIMCO remained in second place in terms of fund family flows, its $2.5 billion intake in May was its weakest showing for the year to date.

The report can be found at http://www.global.morningstar.com/mayflows13. A video recapping March’s U.S. asset flow trends can be found at http://bit.ly/may2013flows. More information about Morningstar Asset Flows can be found at http://global.morningstar.com/assetflows.