ETF flows smash record in third quarter

Quarterly flows into global exchange traded funds have smashed previous records with investors throwing half a trillion dollars worth of new money into the vehicles over the past three months.

Data from ETFGI, a consultancy, indicates that $501bn of net new money had already flowed into ETFs by the end of trading on September 27, which means that with one trading day to go until the end of the third quarter flows had already soared past the previous record of $398bn set in the first quarter of this year.

Deborah Fuhr, chief executive of ETFGI, said that Q3’s bonanza meant the industry had also set a record for flows in the first three quarters of the year of $1.45tn.

There has been a corresponding ballooning of assets which, aided by rising markets, rose from $11.6tn at end of 2023 to $14.1tn by the end of trading on September 27.

“ETFs are now the preferred wrapper,” said Fuhr, pointing to the growing number of conversions of traditional mutual funds into ETFs and a list of 30 asset managers in the US that have applied to the Securities and Exchange Commission for permission to create ETFs as a share class of their existing mutual funds. Vanguard’s lucrative patent on the structure expired last year.

Fuhr said she expected growth to continue to accelerate given that ETFs were now venturing into the structured product market and were increasingly in popularity in savings plans and model portfolios where investments tended to be “sticky”, she said.

“We’re also seeing large [institutional] investors embracing ETFs,” she added.

A Citi report published earlier this year estimated that the exchange traded fund industry could seize half of the money currently held by long-term US mutual funds in the coming decade.

“Some ETF records aren’t going to be broken this year they’re going to be destroyed,” said Eric Balchunas, senior ETF analyst at Bloomberg, in a post on X on Monday, adding that the number of new US ETF launches was also in record territory.