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March saw record outflows of $326 billion from long-term mutualfunds and exchange-traded funds as the COVID-19 pandemic spurred the fastest bearmarket for equities in stock market history,according to Morningstar data.

By comparison, the largest spike in monthly outflows during the2008 financial crisis was $104 billion.

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While total fund flows were dramatically negative, U.S.long-term equity funds saw $10.5 billion of net inflows duringMarch. Nearly all of it was parked in passively managed funds,which attracted $41 billion. Actively managed funds continued theirsustained outflows—in March they lost $31 billion. Active fundsexperienced outflows for the 109th month of the last 120.

Commodity funds were the only other to see positive flows inMarch, at $3.8 billion. Taxable bonds suffered a whopping $240billion in March outflows.

The flows to U.S. equity funds and commodity funds came as stockmarkets were in free fall and demand for energy effectively groundto a halt, leaving the word awash in oil supplies.

"We don't have a lot of look-through on what explains the flowsto U.S. equity funds and commodities," said Tony Thomas, a senioranalyst at Morningstar. "Some of the demand can come fromrebalancing—equities had such a sharp fall that some funds may haveneeded to rebalance back to equities. Obviously, there may havebeen some bottom-fishing too."

Passive funds attracted cash, while some market watchers arepredicting COVID-19's impact on the economy—retailers have beenmostly decimated while shares of Amazon hit record highs—will makeactive management en vogue.

"People may be turning to broad market exposure for the reboundinstead of trying to pick winners and losers," said Thomas.

The hemorrhaging of taxable bond funds could be a bad sign forcorporate balance sheets, as about 20 percent of the overallfixed-income market is corporate debt.

"I can't speculate on how much these flows would impactcorporate balance sheets directly. Still, one might say that theoutflows from taxable-bond funds suggest that investors are havingsome questions about companies' ability to pay their debts ifthere's a steep, prolonged economic shutdown," said Thomas.

"And if there's lower demand for corporate debt, companies couldhave to offer higher yields to lure investors," he added.

The top 10 active fund managers all saw outflows inMarch, with PIMCO, Vanguard, and Fidelity losing the most, at $26.5billion, $25.9 billion, and $24.3 billion, respectively.

All but two of the top 10 managers saw outflows from passivefunds. State Street Global Advisors' SPDR S&P 500 ETF attracted$23.9 billion. T. Rowe Price's passive funds attracted $2.4billion.

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