In May 2025, fund flows in the U.S. rebounded strongly, with open-end funds and exchange-traded funds (ETFs) attracting $56 billion in new investments. This recovery came after a volatile April, triggered by President Donald Trump’s tariff announcements, according to a recent report from Morningstar.
Bond Funds Lead Investor Interest
Investors showed a clear preference for bond funds amid ongoing global economic uncertainty. Fixed-income funds saw inflows of $54 billion in May, with nearly all taxable bond categories gaining. Municipal bond funds also performed well, drawing $7 billion during the month.
This positive shift follows a rare period of withdrawals from long-term U.S. funds in April. Morningstar’s data highlights how investors often move between asset classes to balance growth and protection during uncertain times.
Equity Funds See Mixed Results
Despite gains in the stock market, U.S. equity funds experienced outflows totaling $17 billion. Most domestic equity categories lost money, as investors pulled back. In contrast, international stock funds attracted nearly $7 billion, showing a growing interest in markets outside the U.S.
Rising Demand for Protective Strategies
Funds using derivatives, especially those employing covered-call strategies, saw record inflows of $6 billion. These funds offer downside protection, which investors sought amid market volatility. Nontraditional equity strategies, driven by these products, accounted for most of the $7 billion inflow in alternative equity funds.
Fund Company Performance Varies
Morningstar’s analysis revealed differences in fund company inflows and outflows. Invesco Ltd. (IVZ), The Vanguard Group, and Fidelity Investments led inflows in U.S. equity funds. Meanwhile, iShares, American Funds, and T. Rowe Price Group (TROW) experienced the largest outflows.
Commodities and Alternatives Show Diverging Trends
Commodity funds reversed their recent strong inflows, with the two largest gold ETFs—SPDR Gold Shares (GLD) and iShares Gold Trust (IAU)—losing a combined $1.8 billion in May as interest in precious metals cooled.
Meanwhile, alternative investments continued to attract money, bringing in $7.1 billion in May and totaling $46.2 billion over the past year. Cryptocurrency products, led by the $70 billion iShares Bitcoin Trust ETF (IBIT), dominated this category, accounting for 85% of inflows over the last 12 months.
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