(Bloomberg) — Half of your coworkers may have passed August in Europebut there was no holiday sleeplessness in the booming world of ETFs.
Spurred by big swings in cross-assets on Wall Street, investors added $75 billion to U.S. exchange-traded funds last month, five times more than the same period in 2023. It could well prove the tipping point that keeps inflows roaring toward another historic annual cash draw, after July saw $122 billion — the second-biggest monthly draw ever.
The coming months promise much more volatility, between the expected start of the Federal Reserve's easing cycle, the US presidential election and year-end tax loss harvesting and portfolio rebalancing. It's a stretch that's poised to spur new allocations among institutional managers at a time when retail investors are also using all kinds of ETFs to navigate the rising stock.
After reaching $609 billion so far in 2024, ETFs as a whole have already surpassed the figure for each of the past two years. They are on pace to approach – or even surpass – the record addition of $911 billion era of low everything rates 2021data from Bloomberg Intelligence show.
It's a remarkable success, underscoring growing appetites in investment styles. And that speaks to the explosive growth in the now nearly $10 trillion space, where 3,600 funds offer the ability to allocate money to nearly every asset class.
Read more from Bloomberg Intelligence: The Summer of 2024 ETFs
“It was an extremely eventful summer,” said Athanasios Psarofagis, an ETF analyst at Bloomberg Intelligence. “You had investors piling into bonds, buying dips in stocks, rolling into small caps — that's a recipe for strong flows.”
Active expansion
The result is that ETFs now make up almost a third of total fund assets, double the ratio from 2015, BI data through July show. And it's not about passive index-tracking investing. The universe of actively managed ETFs has grown more than 30% this year, to $783 billion, while assets in the passive segment have grown about 15%, to $8.6 trillion.
Both fixed income and equity products have seen strong demand, with the former seeing consumption of $187 billion in 2024 and the latter $367 billion. Bond inflows have been a big boost this year given how many new offerings are now available, including actively managed ones, according to Todd Sohn, an ETF strategist at Strategas.
He singled out two features: the BlackRock Flexible Income ETF (ticker BINC), which has taken in $3.5 billion, and the Capital Group Core Bond ETF (CGCB), which has pulled in $950 million.
Overall, bond ETFs have taken in $100 billion over the past three months, more than was seen during the early months of the pandemic recovery in 2020, according to Strategas.
But other areas have also been windfalls, including a slew of new Bitcoin-based ETFs, which have seen net inflows of more than $17 billion. Plus, a deluge of releases more complex fundsincluding covered and downside protection calls, have added to the overall flow, Sohn said. Meanwhile, of levers and inverse funds based on single companies have reached more than $9 billion in assets.
When ETF flows reached their previous record high in 2021, different areas were the biggest contributors. At the time, thematic ETFs were a huge success — Cathie Wood's ARK Innovation ETF ( ARKK ), a poster child for the type of fund that was popular during that era — earned $4.6 billion that year.
This year, tech funds are piling into cash, thanks to the rise of the biggest tech stocks, “so any allocation to other sectors will help drive the record,” Sohn said at Strategas. But it also shows “how other angles, like fixed income, crypto — have grown to increase the overall number of the industry.”