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Investors Fled to Bonds in February: Morningstar

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Morningstar has released a report on mutual fund and ETF flows during February — when the United States was just beginning to take coronavirus action and the market woke up to it.

Today the S&P 500 stands around 2,400, dramatically lower than it had been at its highs of around 3,400 on Feb. 18. When the market started falling, redemptions started rising. According to Morningstar:

  • In February, U.S. equity funds lost $17.5 billion, while actively managed equity funds saw $20 billion in redemptions. Further, a record $27.8 billion flowed out of the SPDR S&P 500 ETF.
  • Much of the equity outflows went into taxable-bond funds, which had $23.3 billion in inflows for the month. Morningstar noted that long-term government bonds had their strongest inflows since early 2019.
  • Liquid assets saw huge inflows as investors moved to cash equivalents. Money market funds had $31.4 billion in inflows. The firm noted that this was the first time since October 2019 that money market funds got more in assets than long-term funds, which saw $25.5 billion in inflows.
  • Overall in February, where assets were held led with U.S. equities at $8.5 billion, taxable bonds at $4.6 billion, and money market funds at $3.6 billion.

Actively managed funds overall saw an inflow of $11.7 billion, with active taxable-bond and municipal bond funds leading the way with inflows of $24 billion and $9.7 billion respectively.

On the passive side, there was a net inflow of $13.8 billion, with international equity above far above other categories with almost $11 billion in inflows.

As far as bond funds, intermediate core-plus bond saw greatest net inflows, with the ultrashort bond and short-term bond following. High-yield bonds saw a net $2 billion in outflows.

Top winners in the U.S. fund families was Vanguard, with $20.2 billion in passive fund inflows. iShares followed with close to $11 billion in inflows. JPMorgan led with active funds, with $4 billion, followed by Pimco with $3.8 billion.

The biggest passive fund loser was SPDR State Street Global Advisors, with $26.8 billion in net outflows, while American Funds had the largest active fund net outflows of $2.5 billion.

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