Long-term US fund flows remained in strong form in June, racking up an additional $124 billion for the month. A diverse cast of categories contributed to the net inflows; however, bond funds continued to do most of the heavy lifting. Still, US and sector-equity funds experienced healthy inflows. Alternative offerings that mirror hedge fund approaches also stood out as an area of increased interest.
US Equity Nets a Strong Quarter, Thanks (as Usual) to S&P 500 Trackers
US equity funds attracted almost $19 billion in June, helping push second-quarter inflows past $61 billion. Passive inflows outpaced active outflows in both periods. But putting a finer point on it, three passive funds have been mainly responsible for the group’s inflows—Vanguard 500 Index VOO, iShares Core S&P 500 ETF IVV, and State Street SPDR Portfolio S&P 500 ETF SPY. The iShares exchange-traded fund swelled by $43 billion in June alone for an organic growth rate of 5.0%, its biggest since April 2017.
Sector-equity funds hit their third straight monthly inflow of $18 billion or more in June, taking in $19 billion to help drive a $56 billion bonanza for the second quarter. The 3.2% organic growth rate for the quarter was the biggest since 2021’s first quarter. Technology funds continued to dominate in June. Semiconductor ETFs were popular with investors over the most recent quarter, with the crown going to newcomer Roundhill Memory ETF DRAM, which gathered nearly $20 billion in its first three months of existence, more than triple the take of the next competitor.
International-Equity Funds’ Quarterly Inflow Pace Cools
International-equity funds flew in just $2 billion of new assets in June, bringing the second-quarter total inflow to $11 billion. That came despite a nearly $16 billion outflow in May, as flows into overseas stocks haven’t quite been the same since the onset of the Iran war at the end of February. International equity’s passive cash cows don’t produce to the same extent as the US equity ones. Still, Vanguard Total World Stock Index Fund VTWAX and iShares Core MSCI EAFE ETF IEFA accounted for nearly $7 billion and $5 billion, respectively, of second-quarter net inflows.
Taxable-Bond Fund Inflows Continue Like Clockwork
Following a record month in May, taxable-bond funds continued their inflow streak in June, bringing in $72 billion in new assets. During the month, taxable-bond funds surpassed $7 trillion in net assets for the first time, as continued equity market appreciation has led to further rotation into bonds despite hawkish sentiment stemming from Kevin Warsh’s first Federal Reserve meeting. Intermediate core-plus bond and corporate bond funds each had a strong June, as credit fundamentals remained strong and absolute yields stayed relatively high, owing to higher interest rates.
A Historic Quarter for Munis
Following a near-record $15 billion inflow in May, municipal-bond funds gathered an additional $10 billion in June. Municipal-bond funds have experienced inflows of over $10 billion in four of the last six months. The category group’s nearly $32 billion inflow in the second quarter was the largest quarterly figure on record, with a 3.1% organic growth rate being the largest quarterly figure in five years. Investor interest in municipal bonds remained robust as tax-exempt yields continued to be attractive compared with Treasury yields, and municipal bond issuance stayed strong.
Alternatives Heat Up
Alternative fund flows hit nearly $8 billion in June, pushing the second-quarter total over $15 billion, both all-time records, including on an organic growth basis. That followed a strong first quarter, as well. It has mainly been a two-horse race between multistrategy and equity market-neutral funds, both of which collected more than $8 billion over the year through June. One fund, iShares Systematic Alternatives Active ETF IALT, got a massive $4 billion inflow in June, catapulting its assets into third place among multistrategy funds.