7 Charts on March’s War-Driven US Fund Flows

Long-term US fund flows slowed significantly in March, bringing in under $48 billion, which ended a three-month run of $100 billion-plus in monthly inflows. This was the lowest monthly intake since April 2025’s net outflow as investors recoiled to the impacts of the war in Iran. While taxable-bond funds drove most of the month’s inflows again, it was a lackluster month for the category group, with investors derisking within their fixed-income allocations. While marginal, equity categories across the board gathered inflows.

War-Driven Inflation Fears Inspire Ultrashort Surge

It was a historic month for ultrashort-bond funds, which notched their largest monthly inflow on record with over $24 billion. This represented over 85% of taxable-bond net inflows, which stood at under $29 billion for the month, a notably weak showing for the rest of the category group. With the Iran war and the subsequent closing of the Strait of Hormuz, a systematically important trade route for global oil, inflation risks have reemerged as a primary focus for investors, leading to decreased allocations to long-term bonds and a rotation toward ultrashort bonds that offer very limited duration.

Oil Shock Sparks Credit Exodus

Investors fled credit-risky bond allocations in March as the price of oil skyrocketed from around $70 per barrel to over $100 per barrel. Oil prices’ effect on both corporate fundamentals and the health of global economies cannot be overstated, and investors reduced exposure to more vulnerable areas of the fixed-income universe, such as the high-yield bond and emerging-markets bond categories. High-yield bond funds led all categories with over $9 billion in outflows, while investors pulled nearly $4 billion from emerging-markets bond funds, their largest outflow since March 2020.

Record Outflows for Commodities Funds

Over $11 billion exited commodities funds in March, a record monthly figure. Over 80% of commodities funds belong to the commodities-focused category, which is dominated by gold funds such as SPDR Gold Shares and iShares Gold Trust that consistently gathered significant assets over the past 12 months. These two funds alone drove the entire category group’s outflows; investors fled these investments as the price of gold fell for most of March and the US dollar strengthened from decade lows in late January.

Smaller-Cap Passive US Equity Funds Lack the Large-Blend Mojo

US equity funds eked out an unremarkable inflow in March, led by investors’ unremitting march into passive large-blend funds. Among active fund categories, it’s been a bloodbath, with all categories losing assets in the past year. But it’s not all rosy among passive categories. While the large-blend category added $210.0 billion to its $7.7 trillion pile in the first quarter, small-value, small-growth, and mid-cap value all lost around 5.0% of assets over the past year, while small-blend funds were down $15.0 billion, and the organic growth rate was negative 3.5%.

Investors’ Move Abroad Continues Despite Iran War

International-equity funds notched their 11th straight monthly inflow in March. That came despite a nearly 11% market selloff driven by the Iran war, which began at the end of February. Emerging-markets stocks fell almost 13%. International funds’ roughly $10 billion March inflow fell well short of the previous two months, which both topped $30 billion. Foreign large-blend funds were the big winners, collecting more than $12 billion, while India equity, diversified emerging markets, and China region categories led outflows, dropping about $2 billion each.

Equity-Energy Funds Help Keep Sector Equity’s Inflows Coming

Sector-equity funds hit their third straight quarter of inflows in the first quarter, netting increases in 10 of the past 11 months. Flows in March of roughly $2 billion and in 2026’s first quarter of $40 billion were helped by equity energy funds, as US military strikes in Venezuela and Iran stoked higher oil prices. Energy funds collected nearly $6 billion in March and more than $13 billion in the first quarter, their largest on record for both periods. In the first quarter, industrials funds led with a $14 billion haul, while communications and consumer cyclical funds led first-quarter outflows with $3 billion each.

This article is adapted from the Morningstar Direct US Asset Flows Commentary for April 2026. Download the full report here.