After Big May, ETFs Headed for 2nd Best Year Ever
The bullish mood in financial markets led to a big May for domestic equity ETFs, including an especially strong showing for active strategies, and has now put funds on course to reach the second highest level of inflows in their history, according to the author of a State Street Global Advisors report.
The report, which credits the ongoing rally by the technology and communication services sectors for keeping the risk-on mood alive among investors, showed $92 billion moving into ETFs during May, the best ever for the month and ninth-best overall for any month.
Of those inflows, $60 billion went into equity ETFs, including $50 billion into U.S. equity strategies. That trend aligns with the strength of broader markets. The S&P 500 has gained 11.2% year-to-date. this year through May.
Projecting from the $320 billion in inflows that has gone into ETFs so far this year to a full-year total, report author Matthew Bartolini, head of SPDR Americas Research at Boston-based SSGA, said that ETFs would generate $770 billion in 2024. But Bartolini added that this total doesn't account for the "usual 31% bump for second-half inflows," which could put the total at $890 billion, the second highest annual finish behind only the $990 billion in 2021.
Active ETFs Raking in Assets
The SSGA findings showed strong investor appetite for actively managed strategies, with $22 billion moving into active ETFs in May, marking the 50th consecutive month for inflows into active ETFs.
Through May, active ETFs accumulated more than $108 billion, which represents 33% of all ETF inflows despite representing just 7% of all ETF assets.
โThe pace is unlike anything weโve seen, and active ETFs could hit a record $260 billion if the year-to-date average flow trends continue,โ Bartolini said.
The $13 billion into active equity ETFs in May represented the third-highest monthly inflows for the category, according to the report. Active bond ETFs received $7 billion during the month, marking the second-highest monthly inflows for the category and a record 13th consecutive month with more than $1 billion of inflows.
Alternative-strategy ETFs received $2.7 billion in May for a five-month total of $18.6 billion.