Global ETF market: $7.3T in Q2, up 5.8% from the prior quarter, fueled by $136.6B in inflows and $265B in market appreciation.
In Q2, there were significant inflows in the ETF market, with $89 billion directed towards equity strategies, $45.9 billion towards fixed income, and $1.9 billion allocated to other categories. This overall figure was consistent with Q2 of 2020.
However, what lies ahead for ETFs in the coming months? Vanguard’s specialists, including Samuel Martinez, Cassandre Juste, and David Sharp, shared their insights. They observed a strong performance in equity products, with the S&P 500 delivering an 8.7% return, while fixed income products faced some dampening, likely due to expectations of reduced rate hikes.
The surge in equity strategy investments, which increased by 75% compared to the first quarter, marked a shift back to equities from fixed-income ETFs that had dominated the early part of 2023. Large-cap tech stocks played a significant role in this, and U.S. funds saw substantial inflows, totaling $63.7 billion.
In the fixed income sector, there was a noticeable trend of outflows from short-dated bond ETFs and inflows into intermediate funds.
Vanguard’s experts also emphasized the growing importance of actively managed ETFs, which accounted for 5.8% of industry assets by the end of Q2, up from 5.6% in Q1. Actively managed funds were responsible for 130 out of 189 new ETF launches in the first half of 2023.
Breaking it down further, in Q2, actively managed funds received 9.6% of fixed-income ETF cash flow and 18.9% of equity ETF cash flow. Year-to-date figures showed even higher percentages at 8.3% and 32.6%, respectively.
What Lies Ahead?
The ETF industry is experiencing ongoing growth, driven by a broadening ecosystem and reduced volatility, which is contributing to lower fees for investors.
The report advises ETF investors to stay proactive in initiating positions or adjusting existing ones, emphasizing that disciplined, long-term asset allocation has historically yielded strong returns.
However, it cautions investors to be mindful of certain events that can impact ETF spreads, such as announcements of rate changes by the Federal Reserve. It’s advisable to avoid trading during periods when spreads widen due to such events.
Additionally, the report suggests that diversifying through international fixed-income ETFs could be a sound strategy. Many regions have not yet reached the peak of their rate increases, making this a potentially valuable approach.
Important:Â Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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