7 Charts on US Fund Flows in a Volatile May

Long-term US fund flows experienced another strong month in May, gathering an additional $116 billion. In contrast to April, it was bond funds that drove inflows for the month rather than equity funds. Both taxable-bond and municipal-bond funds had a historic month of inflows in May, as volatility continued and investors leaned back into fixed income.

Taxable-Bond Funds Keep Raking It In

Taxable-bond funds bounced back big in May, with a record monthly inflow of $96 billion. Every category in the group experienced inflows, except for minor outflows from high-yield bonds. With inflation remaining high and the potential for future rate hikes rising, short-term bond Morningstar Categories like ultrashort bond and short-term bond had very strong months. Meanwhile, inflation-protected and short-term inflation-protected bond funds also stood out, both notching over $3 billion in May, among their largest monthly inflows in years. Global bond-USD hedged funds also stood out in May.

Concentrated Flows Into Diversified Bond Categories

The intermediate core bond and intermediate core-plus bond categories each notched their third-largest month of inflows on record in May, gathering $25 billion and $12 billion, respectively. The two largest taxable-bond categories by assets claimed almost 40% of the category group’s net inflows and nearly a third of all US long-term fund flows in May. With elevated bond yields and continued volatility in equity markets, investors have shown greater interest in these funds.

More Muni Madness in May

Municipal-bond funds brought in $15 billion in May, their second-largest inflow in history. Their 1.4% organic growth rate for the month was the second highest in the past five years. Muni-national intermediate and muni-national long, the two largest municipal-bond categories, led the way, both having their highest month of inflows on record. Muni issuance in May was particularly strong, and as equities have generally rallied over the past few months, investors could be seeking tax efficiency at a time when taxable-equivalent yields on municipal bonds are relatively high, and earnings yields on stocks are not.

Tech Funds Spin Up a Second Consecutive Month of Major Inflows

Technology fund inflows overpowered outflows from the rest of the sector-equity funds in May, pushing the category group to a net inflow of more than $19 billion. It was the second-straight month of tech-fund dominance. Roundhill Memory ETF DRAM collected more than $8 billion in just its second month of existence. But major inflows were spread around a variety of industry themes, including semiconductors, software, and artificial intelligence, as well as diversified tech funds.

International-Equity Funds Bid Adieu to Inflows Streak

International-equity funds lost nearly $16 billion in assets in May, as the ongoing Iran war likely stoked geopolitical, trade, and currency concerns. It was their first outflow in a year and the largest since December 2022. Similarly, focused-region funds (mostly single-country funds) lost almost $4 billion, their first outflow since December 2024. And emerging-markets funds lost more than $3 billion, in contrast to strong inflows over the year to date and trailing 12-month periods. Foreign large-growth funds, meanwhile, lost nearly $5 billion in May, their 22nd monthly outflow over the past two years.

Baron Capital Rides SpaceX-Driven Flows to the Moon

Baron Capital Group has made hay while the sun has shone. May inflows, likely related to the anticipated June IPO of SpaceX SPCX, totaled nearly $6 billion for the firm. The monthly inflow and the related organic growth rate of 14.9% both shattered firm records. New money flowed largely into Baron Partners BPTIX, which in recent months held over 20% of portfolio assets in pre-IPO SpaceX shares, giving fund shareholders a below-IPO price on the hot stock. Since March, the firm’s net assets have grown by more than $10 billion, reversing a trend of consistent monthly outflows dating back to 2022.