US-listed ETFs enjoy $40bn bonanza in just one week

More than $40bn flooded into US exchange traded funds in the week ended June 14, making it the sixth-largest weekly haul on record, according to data from the Investment Company Institute.

The bonanza for ETFs came as money continued to leach from mutual funds, which recorded outflows of more than $7bn in the same week. However, the huge disparity between the two figures suggests that investors are not simply switching from one vehicle to another.

Shelly Antoniewicz, senior director of industry and financial analysis at the ICI, said the majority of the flows, some $29bn, had gone to domestic equity ETFs and that half of that had arrived in just one day on June 14.

This feeding frenzy took place a day after the US published data showing that consumer price inflation had slowed sharply to 4 per cent in the year to May, significantly lower than the 4.9 per cent reading a month earlier and the peak of 9.1 per cent last June. In further encouragement to investors, the US Federal Reserve held the federal funds rate at 5-5.25 per cent, the first time it has skipped an increase in more than a year.

“There’s been a surge in equity ETF demand in June as many investors have moved back into the category and are taking cash off the sidelines,” said Todd Rosenbluth, head of research at VettaFi.

“While money market funds are sporting compelling yields, with the Federal Reserve pausing its rate hiking programme and inflation cooling, investors have been more willing to take on risk,” he added.

LSEG Lipper, a data provider, said in a research note that both the S&P 500 and the Nasdaq Composite indices closed near 14-month highs on June 12 ahead of the awaited inflation data, but also that non-domestic US-listed equity ETFs took in a punchy $7bn during the week ended June 14.

“The inflows into ETFs — especially equity ETFs — seem to signify a shift in investor sentiment about the direction of the economy and the growing belief in a new bull market,” said Bryan Armour, director of passive strategies research for North America at Morningstar.

He noted there had also been a change in focus from ETFs that might imply shorter-term bets to funds with “a reputation for attracting stickier long-term investors”.

The top seven ETFs by inflows on June 14 were all Vanguard ETFs that almost covered the full “Morningstar Style Box”, meaning large-cap, mid-cap and small-cap strategies, and value, growth and total market styles, Armour added.

Four of the five higher weekly ETF inflows on record occurred in 2021, before Russia’s invasion of Ukraine, which sparked market turmoil last year. The highest week of inflows was registered in the week ended June 16 2021, when investors poured more than $61bn into US-listed ETFs. The remaining week occurred in 2022, when in the seven days to December 14 nearly $48bn flowed into US-listed ETFs.