Long-term US funds brought in $136 billion in a strong January, the second-largest monthly inflows since March 2021, trailing only December 2025. Taxable-bond funds continued to drive inflows, making up two-thirds of net flows, while international-equity and sector-equity funds experienced their strongest monthly inflows in years. US equity funds continued to shed assets, a common theme over the past nine months. Investors continued to move assets into international markets.
Business Is Booming for Bond Funds
Taxable-bond funds’ 1.4% monthly organic growth rate was their highest level since January 2021, while their intake of $91 billion was the second highest on record, slightly trailing June 2020’s figure. Similarly, the 1.7% organic growth rate for intermediate core bond Morningstar Category funds was the highest since January 2021, and their monthly intake of over $27 billion was the second highest on record. Just four of 27 taxable-bond categories experienced outflows, with long government funds shedding the most as concerns of curve steepening continued. Multisector bond funds also brought in a record $10.1 billion in January.
Global Diversification in Bond Allocations Continues
Non-US bond categories saw their largest inflows over the past 10 years in January, gathering nearly $13 billion, largely driven by the global bond–USD hedged category’s $8 billion monthly inflows, its second largest on record. Emerging-market local-currency funds also saw high demand despite being a smaller category in total assets; the $1.2 billion intake was its largest since April 2022. Investors continue to pour money into foreign bonds as they potentially look for diversification away from US assets amid concerns of Federal Reserve independence and the fiscal budget.
Muni Momentum Approaches Record Levels
In January, municipal-bond funds brought in $14.5 billion, good for a monthly organic growth rate of 1.5%, the largest figure for both since January 2021. Muni-national intermediate category funds, the largest of the muni categories, posted a $6.6 billion inflow, their largest on record, though every muni category saw inflows. January is a seasonally strong month, especially for muni funds because of their tax-sheltering effect. Recent flows pushed muni-bond funds over the $1 trillion net assets mark for the first time in four years.
US Equity Fund Growth Dominated by ETFs, Including Active Ones
US equity funds shed $34 billion in January, with long-term trends continuing—namely, investors rebalancing out of growth and swapping active for passive. But fund vehicle has been a bigger part of the growth story than active/passive. Active open-end funds have seen massive and unremitting outflows, while flows in and out of their passive counterparts have been mercurial. But exchange-traded funds are winning on both sides; massive flows into passive ETFs have complemented steady and growing flows into active equity ETFs. Growth here is from a small base, but active ETFs have a growing influence within US equity.
Foreign-Stock Funds Take Flight
International-equity funds notched a notable $31.5 billion inflow in January, their ninth consecutive. Funds in the diversified emerging-markets category, with otherwise modest flows during international equity’s hot streak, came to the fore with an inflow of $15.4 billion, the largest on record and largest on an organic growth basis since March 2021. Emerging-market investors went almost entirely passive here, with active strategies claiming less than 1% of January’s inflow.
Sector-Equity Funds Start 2026 With a Bang
Sector-equity funds attracted more than $28 billion, their biggest monthly haul on record and largest on an organic-growth basis since February 2021. Industrials, the fastest growing sector-equity category, gained $5.6 billion in January, its largest inflow ever. And healthcare funds’ turnaround continued with their third inflow in four months. Technology funds, the largest in the group, also continued to attract flows. Natural-resources funds led the group in January.
Natural-Resources Funds Post Unnatural Inflows in January
Natural-resources funds were the big winners among sector funds in January. Their unnaturally large $7.5 billion of inflow was the biggest on record and the largest on an organic-growth basis since March 2021. As in most areas, passive dominates here, with Global X Copper Miners ETF COPX attracting $1.8 billion as the metal reached record prices in January. Other recent winners focus on holding rare-earth metals and uranium.
This article is adapted from the Morningstar Direct US Asset Flows Commentary for January 2026. Download the full report here.