Investors Maintain Defensive Posture in October
US investors poured nearly $92 billion into long-term funds in October, the largest inflow of 2025. Consistent with the past several months, flows were concentrated in bond funds as investors searched for stability, while US equity funds shed assets for a sixth straight month as valuations pushed higher. Taxable- and municipal-bond funds both experienced their largest inflows since 2021, while technology equity funds experienced their largest inflow on record (and largest organic growth rate since February 2021), as artificial intelligence continued to fuel market gains.
Taxable-Bond Funds’ Heater Continues
The past three months of inflows into taxable-bond funds have all exceeded $60 billion, a mark that hadn’t been hit since April 2021. October’s inflow of nearly $67 billion was the largest. Investors have kept gravitating toward the stability of fixed income as equity markets have continued to set records. While conservative Morningstar Categories like intermediate-core bond have continued to lead the pack, multisector-bond funds’ hot streak also persisted. Taxable-bond net assets have grown over 35% over the past three years and surpassed $6.5 trillion for the first time in October.
More Muni Mania
For a second straight month, municipal-bond funds brought in large inflows, netting nearly $10 billion in October. October’s 1% organic growth rate was the largest since 2021. Nearly $45 billion in new assets have flowed into these funds since April 2025, and the category nears $1 trillion in net assets. Muni-bond funds across the credit and duration spectrum have continued to attract assets as tax-exempt yields have remained historically high and rates have trended downward.
As US Equity Fund Outflows Persist, Is Passive to Blame?
US equity funds hit their sixth straight monthly outflow in October, shedding nearly $20 billion and bringing year-to-date outflows to nearly $88 billion. Durable category trends persisted; large-blend funds’ $11 billion inflow was the only one of the nine categories in the group, while growth outflows continued. But overall, it’s been weaker passive inflows being dominated by unremitting active outflows that explain the overall category group’s struggles over the past half year.
As Tech Has Thrived, Health Has Dived
Sector-equity funds completed a half year of consecutive monthly inflows with a nearly $13 billion take in October, with technology funds claiming the lion’s share. In fact, over the past 12 months, tech funds gathered more than $26 billion versus $17 billion for the overall group. Meanwhile, tech and health funds have been two paths diverging in a wood, and health has been the road less traveled by investors. Health funds have shed a cumulative $29 billion over the past 12 months as the sector has been hit by regulatory uncertainty, postcovid hangover issues, and major selloffs of managed care stocks.
ETF Giants Keep Growing
Exchange-traded funds collected bumper inflows in October. Their $166 billion haul was the biggest month on record and brought total new money in 2025 to over $1 trillion. About 60% of the monthly and year-to-date flows went to the three entrenched leaders in the space: iShares, with $3.87 trillion in total net assets; Vanguard, at $3.76 trillion; and SPDR State Street Investment Management, at $1.79 trillion.
This article is adapted from the Morningstar Direct US Asset Flows Commentary for October 2025. Download the full report here.