Key Takeaways
- ETF demand surged yet again in Q1.
- Actively managed ETF flows posted another strong quarter of growth.
- Spot bitcoin ETP flows stormed out of the gate.
Another quarter, another quarterly torrent of ETF flows. US-listed ETFs gathered nearly $200 billion in Q1 flows, which is a nearly 150% increase compared to Q1 (i.e., first quarter) 2023 inflows. And several trends from 2023 appear to have spilled over into 2024.
Here are the key happenings in ETFs.
Stock ETFs lead the rush
Of the roughly $200 billion gush in ETF net flows, which are inflows less outflows, US equity (i.e., stock) ETFs dominated another quarter (see Q1 2024 US-domiciled ETF flows in billions chart below). The S&P 500 gained more than 10% during Q1, rising above 5,000 for the first time ever, and investors rode that momentum via ETFs in large part.
Source: Bloomberg, as of 03/31/2024. EM equity = Emerging market equity.
Broad-based stock index funds saw a majority of the inflow activity last quarter, and stock ETF flows have now outpaced fixed income (i.e., bond) ETF flows 4 straight quarters.
With that said, bond ETF flows—which slowed for most of 2023 before picking up during the last 3 months of the year—took in a relatively strong amount of net flows during Q1. Of the roughly $40 billion in bond ETF flows, intermediate/long duration ETFs saw inflows, while short/ultrashort names experienced outflows.
At the sector level, defensive sector ETF net flows generally outperformed cyclical sectors. The outlier for this trend during Q1 was technology-focused ETFs, which attracted the most inflows by far (+$9.5 billion), while utilities (—$2.3 billion) led outflows (see US sector ETF flows in billions chart).
Source: Bloomberg as of 03/31/2024.
Momentum appears to have played a role in Q1 sector flows, as technology was the leader in 2023 (+$6 billion) and energy had the 2nd most outflows (—$8 billion). Health care, which saw the most outflows in 2023 (—$11 billion), was able to swing to inflows during Q1, potentially signifying a change in the outlook for that sector.
Actively managed, bitcoin ETPs gain steam
One of last year's burgeoning trends was the increasing prevalence of actively managed ETFs. That continued in Q1. Of the 138 ETFs that launched during the first 3 months of 2024, actively managed ETFs accounted for 90.
In terms of net flows, actively managed ETFs took in $60 billion (30% of ETF industry inflows), while still only accounting for 7% of assets. Of that $60 billion, more than half flowed into equity ETFs and less than a third went to fixed income ETFs. Despite the significant growth in actively managed ETF flow growth in recent quarters, passive funds are still seeing substantially larger flows (see Active vs. passive ETF flows YTD in billions chart below).
Source: Bloomberg, as of 03/31/2024
And perhaps no trend in recent memory has captured headlines among ETFs more than the January 2024 approval of the first ever spot bitcoin ETP (an ETF is a type of ETP). The 9 spot bitcoin ETPs launched in January stormed out of the gate, accumulating more than $27 billion in Q1 net flows. ETF industry watchers are anticipating many more of these types of ETPs to launch in 2024.
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