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Bond Outflows Top $80 Billion

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Morningstar says estimated U.S. mutual fund asset flows for August included $15.5 billion in outflows from taxable bond funds and $11.8 billion from municipal bond funds. Since late end of April, bond-funds outflows have grown to nearly $82 billion, with taxable bond and municipal bond offerings losing nearly 2% and 7% of assets, respectively. (The Chicago-based research group says it estimates net flows by computing the change in assets not explained by fund performance.)

“Bond funds have not suffered universally,” according to analyst Mike Rawson. “Assets in bank-loan funds have doubled over the past year, benefiting in the rising interest rate environment. Ultra-short bond funds, which have become a substitute for money market funds amidst low yields, have also seen strong inflows.”

When it comes to emerging markets, Rawson notes, institutional and retail investors are on divergent courses: ETFs, which appeal mainly to institutional clients, continued to experience outflows from the asset class in August; mutual funds, largely held by individual investors, had another month of inflows to emerging markets.

The popular PIMCO Total Return Fund saw its assets drop by $41.8 billion from May to August—$26.1 billion from outflows and $15.7 billion from share price declines, the latest Morningstar report says. Oakmark International, however, had inflows of about $2 billion in August. The fund, managed by David Herro, Morningstar’s International-Stock Fund Manager of the Decade, has improved 37% during the past year.