Money market funds bled $114 billion in the first quarter, the biggest quarterly outflow since the second quarter of 2010, according to a report released by Morningstar, Inc.

The report, titled the Morningstar Direct Asset Flows Update, showed that long-term funds took in $29.3 billion in March to end the quarter with inflows of $106.3 billion, but outflows continued for U.S.-stock funds for the eleventh straight month.

U.S.-stock funds lost $8.3 billion in March, while, for the seventh straight month, taxable-bond funds topped all asset classes with inflows of $24.9 billion.

For the quarter, taxable-bond funds saw inflows of $78.5 billion.

Meanwhile, actively managed U.S. large-cap stock funds saw their eleventh straight quarter of net outflows, with $20.9 billion leaving the asset class.

“We can’t accuse investors of chasing stock fund returns. (Yet.) With each passing quarter, the impact of the disastrous fall of 2008 becomes a smaller factor in trailing returns,” declared the Morningstar report. “As of March 31, the trailing three-year return calculation for funds no longer includes 2009's rocky first quarter, for instance. The presses are likely running hot at the big distributors to produce updated fact sheets to advertise the newly attractive returns of U.S.-stock funds.”

Intermediate-term and high-yield bond funds saw the greatest inflows in March and in the first quarter among fixed-income funds. Since January 2009, these two categories have absorbed new assets of $314.4 billion.

Further, emerging-markets bond fund flows reached $6.1 billion in the first quarter, by far the largest quarterly intake for these offerings. Assets in the category have risen to $55.5 billion today from $35.9 billion a year ago.

“While bonds haven't kept pace with stocks this year, first-quarter bond-fund returns still reflect a healthy dose of capital appreciation, considering the low level of income they're currently generating,” the report said. “The bond bubble that many commentators have worried about hasn't burst yet. Persistent demand from mutual fund and institutional investors, including underfunded public and private pension plans, help explain why.”

DoubleLine Total Return funds saw first-quarter and one-year inflows of $6.4 billion and $15.4 billion, respectively, leading all U.S. open-end funds over both periods.


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