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.

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.