Morningstar says bond funds win again through August 2010

Morningstar flow data for August 2010 just reported.

Flows into mutual funds increased by more than 11 percent in August to $16.8 billion, with fixed-income funds again receiving the majority of these assets. Outflows from US equity ETFs contributed to net outflows of $1.3 billion from U.S. ETFs in August, ending a six-month streak of consecutive monthly inflows.

Additional highlights from Morningstar's report on mutual fund flows:

• Taxable-bond funds accumulated assets of $168.5 billion year to date, and much of these inflows are likely attributable to low yields on money market funds. Money market funds have seen outflows in 16 of the 19 months since February 2009, for a total loss of nearly $1.0 trillion, reducing money market total net assets and market share to $2.7 trillion and 27.6%, respectively.

• Outflows persisted for U.S. stock funds, with redemptions of $14.3 billion in August. Funds in the large growth and large value Morningstar categories saw the greatest outflows, surrendering a combined $8.6 billion in August alone and $38.3 billion for the year to date.

• Although domestic-equity funds have seen outflows of $42.2 billion in 2010 and $25.7 billion in 2009, U.S. stock funds still have total net assets of more than $2.9 trillion. The $67.9 billion in outflows since the end of 2008 are not even 2.4 percent of that total, and passively managed domestic-equity funds have actually seen inflows in 34 of the past 36 months.

• PIMCO's bond lineup helped it gather $7.7 billion in August to top all fund families, followed by Vanguard, although the firm's inflows dropped to $4.0 billion after taking in $4.9 billion in July. American Funds and Fidelity, which specialize in actively managed funds, lost another $5.5 billion and $1.6 billion, respectively, to outflows in August.

Additional highlights from Morningstar's report on ETF flows:

• International-stock ETFs had inflows of $4.4 billion, the highest of all asset classes for the second straight month, thanks to strong demand for emerging-markets ETFs. Over the trailing three-year period, emerging-markets ETFs have accounted for more than 61 percent of flows into the asset class.

• SPDR S&P 500 SPY, the largest ETF in terms of net assets, saw outflows of $6.6 billion in August, as investors moved their assets into higher-yielding equity strategies, including defensive and dividend-paying sectors and preferred stock ETFs.

• iShares iBoxx $ High Yield Corporate Bond HYG and SPDR Barclays Capital High Yield Bond JNK, with inflows of $464 million and $332 million, respectively, led flows into junk bond ETFs, as investors took on more risk in search of more attractive yields in August. Short-term bond ETFs remained popular despite their unimpressive yields.

• Precious-metals ETFs, bolstered by inflows of $827 million into SPDR Gold Shares GLD, were the most popular ETFs in the commodities asset class in August.

To view the complete report, please visit Morningstar.