The Impressive Growth of Exchange-Traded Fund Inflows in 2024

The year 2024 has seen a remarkable increase in exchange-traded fund (ETF) inflows, with monthly records already being surpassed. To add to this surge, industry managers believe that these inflows could witness a significant impact from the ongoing money market fund boom before the year concludes. According to Nate Geraci, the president of The ETF Store, the massive $6 trillion parked in money market funds poses as a major wildcard for the industry going forward. He noted during a recent interview on CNBC’s “ETF Edge” that the flow of funds into Real Estate Investment Trust (REIT) ETFs and the broader ETF market could potentially receive a significant boost due to this development.

The Investment Company Institute reported that the total assets in money market funds hit a new high of $6.24 trillion in the past week. This surge in assets is primarily attributed to investors awaiting a Federal Reserve rate cut. Matt Bartolini, from State Street Global Advisors and the head of SPDR Americas Research, explained that if the yield decreases, the return on money market funds is also expected to decline. Consequently, as interest rates fall, a portion of the significant capital currently on the sidelines in cash is anticipated to re-enter the market, pivoting towards stocks, higher-yielding segments of fixed income, and various ETF opportunities.

Bartolini also highlighted a potential uptick in gold ETFs, noting the substantial $2.2 billion in inflows over the last three months. This strong performance at the end of the previous year indicates a positive outlook for the industry as a whole. Moreover, he predicts a bright future for ETFs in general, anticipating a continued rise in inflows across different sectors, driven by the transitioning market trends and investor sentiment.

Looking ahead, Geraci foresees significant potential for large, megacap ETFs to capitalize on the current market dynamics. He also remains optimistic about the possibility of ETF inflows reaching or surpassing the 2021 record of $909 billion. Barring any unforeseen massive market downturn, Geraci believes that investors will likely continue to allocate funds towards ETFs, potentially surpassing previous records in the near future. This positive outlook reflects the overall confidence in the ETF market and its growth prospects in the coming years.