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August Flows Show More Movement from Active to Passive Funds

Morningstar’s report on August fund flows shows continuing movement of investor funds from actively managed funds to passive funds, particularly with respect to domestic equity and international equity funds.  Bond funds continued to experience inflows, with intermediate bond funds attracting the most.  According to the report, the flows demonstrate the investors are seeking an income stream and are less worried about falling bond prices in the event of an interest rate increase.  Emerging markets funds also showed signs of a rally.  According to Morningstar, the improved flows are a result of “stronger currencies, diminishing worries about China, and demographics (younger populations equal more potential to drive growth going forward).”