Active U.S. equity funds continued to hemorrhage assets in August while their passive counterparts persisted in attracting investor money, Morningstar reported Friday.

Active funds experienced outflows of $25.4 billion, down from July outflows of $32.9 billion, while passive attracted $16.4 billion, about half the previous month’s $33.8 billion intake.

Similarly, international equity funds saw outflows from active ones and inflows into passive ones. The Morningstar report noted an important detail, however: total international equity flow last month consisted of a $7.3 billion outflow from developed markets and a $6.2 billion inflow into emerging markets.

Taxable bond funds accumulated flows of $27.8 billion and municipal bond funds $7.4 billion in August. The report said this reflected investors’ preference for a steady income stream and suggested most investors were not especially worried about rising interest rates.

Commodity funds experienced a trend reversal in August with a $1 billion outflow from passive funds.

Morningstar estimates net flow for mutual funds by computing the change in assets not explained by the performance of the fund, and estimates net flow for ETFs by computing the change in shares outstanding.

Other Findings

The diversified emerging markets category, consistently on the top-flowing list for the past few months, had August inflows of $5.5 billion. Several factors account for investor interest, according to the report: stronger currencies, diminishing worries about China and young populations driving more potential for growth going forward.

Returns certainly have been favorable. Year to date, the MSCI Emerging Markets Index is up 14.5% compared with the MSCI EAFE’s return of 0.5% and the S&P’s 7.8%.

Morningstar cautioned, however, that emerging markets have unique risks, and returns can be much more volatile than developed market ones. Shocks that send developed market returns reeling tend to hit emerging markets harder, Morningstar said.

Intermediate-term bond was the top Morningstar category in August, unchanged from July. Investors prefer these funds, the report said, because short-term bonds do not yield enough, and long-term ones have higher interest-rate risk.

The bottom five categories were also little changed from last month. Large growth, world allocation and Europe stock sustained the largest outflows.

WisdomTree Europe Hedged Equity, Deutsche X-trackers MSCI Europe Hedged and iShares MSCI Eurozone suffered outflows $391 million, $397 million and $543 million, respectively, in August.

Among the top 10 U.S. fund families, only Vanguard, State Street and T. Rowe Price had flows into active strategies in August, while Pimco was alone in bleeding assets from passive funds.

American Funds’ active products suffered their third consecutive monthly outflow in August, $1.5 billion.

Vanguard funds continued to lead passive inflows, gathering $20.7 billion in August. BlackRock trailed with inflows of $11.3 billion.

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