Investors Stayed Defensive in September
US investors put more than $85 billion to work in long-term funds in September, the largest monthly inflow of 2025. Investors sought safe havens, such as less-volatile taxable-bond categories and funds that own gold, whose spot price has continued to set record highs. Equity markets also continued to set records, yet US equity fund outflows persisted. Meanwhile, leveraged funds shed assets and inverse equity funds gained assets, suggesting investors have adopted a bearish tone.
Back-to-Back Strong Months of Inflows for Taxable-Bond Funds
Taxable-bond funds brought in over $60 billion for a second straight month, which hadn’t happened since early 2021, as investors continued to favor the stability of fixed income over stocks. Less-volatile bond categories continued to pull in assets, but funds in more opportunistic categories also enjoyed inflows. Multisector bond funds have had their two largest monthly flows over the past 15 years in back-to-back months. More broadly, as the Federal Reserve cut rates for the first time since late 2024, 20 of 23 taxable-bond Morningstar Categories saw inflows in September, including long-term bond funds’ first inflow since February.
Major Month for Municipals
In September, investors parked $8.9 billion in municipal-bond funds, the largest flow on an absolute and relative basis since August 2021. While this may signal a cautious sentiment among investors, even high-yield municipal funds saw their largest monthly inflow since July 2021. Long-term municipal funds also had a strong month, potentially echoing a more relaxed view of long-term inflation risk among investors.
US Equity Funds Hit Fifth Month of Outflows
Outflows continued in September for US equity funds, as they shed nearly $18 billion, with the large-growth category again leading losers with more than $6 billion exiting. However, large growth’s market appreciation has countered—or perhaps even driven—outflows, with assets growing even as investors have taken gains. All US equity categories lost ground in September, except large value and small blend.
Rotation to International Stocks Persists
International-equity funds have seen consistent inflows since May. Investors have moved more than $40 billion abroad over the past five months, including more than $4 billion in September. That’s come at the expense of US equity funds, which have shed more than $100 billion since May and nearly $18 billion in September. Organic growth rates, shown below, level the playing field in terms of total assets; since the start of May, international funds have grown 0.88%, while their US counterparts have shrunk 0.63%.
Gold Records in Sight
Gold continued to prove its mettle in September. With prices continuing to soar, investors put $9.9 billion into commodities-focused funds, a roughly 50% increase from August and the largest monthly inflow since April 2020 (albeit far lower on an organic growth basis). These funds, which invest mostly in precious metals (primarily gold), have gathered more than $38 billion in 2025. That’s the second most in the past 15 years and, at this rate, would overtake 2020’s $44 billion record by year-end.
Leveraged Fund Investors Return to Earth
Investors’ risk-off sentiment was clear in September. Leveraged equity funds, which offer magnified exposure to equities, saw their largest monthly outflow on record in September. Similarly, leveraged debt funds experienced their largest monthly outflow since 2014, despite lower interest rates. General conservatism was a theme for the month, and bearish bets on the equity market increased; inverse equity funds, which profit when the equity market declines, saw their largest monthly inflow since late 2023.
This article is adapted from the Morningstar Direct US Asset Flows Commentary for September 2025. Download the full report here.
