By buying bottom-up US stocks and bonds through ETFs, US ETF funds inflows hit record, VOO attracts US$65 billion in money

Source: Wall Street News

As market volatility intensifies, U.S. investors are flocking to ETFs (exchange-traded funds) in droves.  

Since the start of this year, the uncertain U.S. stock market has created opportunities for investors to buy the dip. Meanwhile, with some capital shifting from mutual funds to ETFs, U.S. ETFs have attracted $437.9 billion in inflows so far, with the scale of capital inflows expected to hit a record high for the second consecutive year.  

Among this year’s ETF fund inflows, the biggest beneficiary is Vanguard Group’s S&P 500 ETF (ticker: VOO), which has absorbed an astonishing $65 billion in net inflows this year, making it the world’s largest ETF by assets under management.  

Last year, VOO set an annual ETF inflow record of $116 billion, and this year it is expected to break this record again by October. Data shows that when U.S. stock volatility surged to a five-year high in April, the fund saw its highest-ever monthly inflows.  

Greg Davis, President and Chief Investment Officer of Vanguard, said:  

“During the market turbulence in early April, we saw a buying-to-selling ratio of 5:1. Investors are holding a lot of cash, and they know that when asset prices fall, it’s time to put money into the market.”  

Notably, the long-term trend of capital shifting from mutual funds to ETFs may soon accelerate further.  

According to reports, dozens of fund management companies have submitted applications to the U.S. Securities and Exchange Commission (SEC) to create new ETF share classes for existing mutual funds. This would allow them to offer popular strategies within the ETF framework without starting from scratch.  

SEC Commissioner Mark Uyeda said earlier this year that he has asked the agency’s staff to prioritize processing these applications, and industry insiders expect approvals could come as early as this year.  

### "Cash Is King" Mentality Prevails, Short-Term U.S. Treasury ETFs Gain Traction  

While stock ETFs dominate, investors’ defensive mindset remains evident.  

Data shows that the second most popular ETF this year is BlackRock’s 0-3 Month Treasury Fund, with nearly $17 billion in inflows and a 12-month trailing yield of 4.7%. State Street’s similar product also ranks among the top 10 in inflows.  

Larry Fink, CEO of BlackRock, said earlier this month:  

“There is $11 trillion in the U.S. sitting in money market funds. When there is uncertainty, people hold more cash—that’s what we’ve observed.”  

Todd Rosenbluth, Head of Research at data provider VettaFi, also noted:  

“We’re seeing some defensive moves in fixed-income assets. Many short-term Treasury products are among the top 10 inflows, indicating that investors are happy to wait.”  

### Actively Managed ETFs Rise, "Boomer Candy" Gains Popularity  

Notably, actively managed ETFs are attracting a disproportionate share of new assets.  

According to Trackinsight data, although actively managed funds account for less than 10% of the ETF industry’s total assets, 30% of this year’s ETF inflows have gone to such products.  

A JPMorgan actively managed stock fund also ranks among the top 10 inflows. The fund aims to reduce volatility and generate above-average dividend income through options strategies. Analysts have dubbed such products “boomer candy” due to their popularity among retirees.  

Greg Friedman, Head of ETF Management and Strategy at Fidelity, said:  

“Over the past 12 to 24 months, we’ve seen very strong inflows, mostly from the active management side. This trend has remained stable even during periods of extreme volatility.”  

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