Morningstar, Inc., a leading provider of independent investment research, today published its eighth annual Global Fund Flows Report examining worldwide 2019 mutual fund and exchange-traded product (ETP) fund flows. Overall, long-term global flows (excluding money-market funds) nearly doubled in 2019 to $1 trillion. On a net basis, nearly all $1 trillion in long-term flows went into fixed-income funds, which received record inflows and surpassed the prior record of $869 billion set in 2017.

“This wave of demand for fixed-income funds occurred despite low interest rates globally—and even negative interest rates in some European markets,” said Kevin McDevitt, senior analyst and co-author of the Global Fund Flows Report. “Overall, we saw investors eager to incrementally offset equity exposure as global stock markets rallied this past year.”

Highlights from Morningstar’s annual Global Fund Flows Report include:

In 2019, U.S. inflows bounced back from 2018 with $399 billion in long-term inflows to lead all regions. Europe followed with $254 billion, while Asia inflows fell year over year to $101 billion from $169 billion, due in part to reduced intervention from the Bank of Japan.

Equity flows were flat in 2019 after collecting $354 billion the prior year. With the MSCI World Index gaining 27.4% in local-currency terms in 2019, the lack of investor demand points to the influence of managed portfolios, which likely trimmed equity exposure throughout the year. Similarly, the Bank of Japan cut back on its purchases of equity exchange-traded funds.

Index fund inflows rose to $769 billion in 2019 from $702 billion the year prior, although this fell short of 2017’s record $963 billion. Active funds saw $252 billion in inflows, a strong relative showing owing primarily to fixed-income flows. Index funds’ share of long-term assets grew in 2019 to 31.0% from 28.6%.

Among fund families, BlackRock and iShares combined for $298 billion in inflows, including money-market funds, in 2019. Vanguard followed with $263 billion, $221 billion of which went into long-term funds. Excluding money-market funds, BlackRock and iShares collected $205 billion in 2019.

The $898 billion Vanguard Total Stock Market Index—the largest fund in the U.S. by total assets with a Morningstar Analyst RatingTM of Gold —grew by nearly $19 billion in 2019. Its 2.8% organic growth rate was the slowest in the past decade, meaning that the $1 trillion milestone is likely still far off.

The Morningstar Global Fund Flows Report is based on assets reported by more than 4,000 fund groups across 85 domiciles. The report represents more than 95,000 fund portfolios encompassing more than 240,000 share classes and includes a global overview as well as analysis about the United States, Europe, Asia, and cross-border offerings. Morningstar estimates net flow for mutual funds by computing the change in assets not explained by the performance of the fund and net flow for ETPs by computing the change in shares outstanding.

For additional insights and data visuals, please download the report here.

Source: Morningstar