U.S. Investors Pour $437B Into ETFs—More Than Finland’s GDP

Despite sharp fluctuations in the U.S. stock market this year, American investors’ enthusiasm for ETFs has not diminished. In fact, the turbulence appears to have made them even more eager to invest in ETFs. So far this year, investors have poured a record-breaking $437 billion into U.S. ETFs.

If this pace of inflows continues—especially since summer and fall tend to accelerate based on historical trends—U.S. ETFs could post their second consecutive year of record inflows.

In reality, when the U.S. market turned volatile, many investors actually increased their exposure to U.S. assets. Now, they’re primarily doing so through ETFs.

“Investors are viewing sell-offs as buying opportunities,” said Todd Rosenbluth, Head of Research at data provider VettaFi.

The biggest beneficiary of this wave of capital inflow is the new champion of the ETF industry: Vanguard’s S\&P 500 ETF (ticker: VOO). This ultra-low-cost index fund has attracted a net inflow of \$65 billion this year, overtaking SPY to become the world’s largest ETF by assets.

Greg Davis, President and Chief Investment Officer of Vanguard, noted that many investors were holding large cash positions and were waiting for the right opportunity to re-enter the stock market.

“During that period of tumult in early April, we saw a 5-to-1 buy-to-sell ratio,” Davis said. “Investors have a tremendous amount of cash sitting on the sidelines and they know that if things are on sale, it is time to put money to work.”

The second-most popular ETF this year is a BlackRock fund focused on 0–3 month Treasury bills, which has attracted nearly $17 billion in inflows. This cash-like fund offers a 12-month yield of 4.7%.

“We’ve seen some defensive buying in fixed income,” Rosenbluth noted, “with several short-term Treasury products entering the top ten, indicating that investors are willing to earn steady returns while they wait.”

Nevertheless, the majority of this year’s inflows have still gone into equity ETFs.

In addition to passively tracking index ETFs, actively managed ETFs have continued to attract strong investor interest. According to data from Trackinsight, active funds represent less than 10% of total ETF assets, but they’ve received 30% of all ETF inflows this year.

Fidelity, long known for its mutual fund offerings, has shifted focus in recent years to launch actively managed ETFs to match the growing investor demand. “We’ve seen very healthy inflows over the past 12 to 24 months, with most of it going into active products,” said Greg Friedman, Head of ETF Management and Strategy at Fidelity.

For years, investors have been moving money out of mutual funds and into ETFs, drawn by tax advantages and liquidity—driving sustained inflows. That trend may soon accelerate even further.

Dozens of fund managers have submitted applications to the U.S. Securities and Exchange Commission (SEC) to launch ETF share classes of existing mutual funds. This would allow them to offer popular strategies in ETF form without having to start from scratch.

SEC Commissioner Mark Uyeda stated earlier this year that he had directed agency staff to prioritize this initiative. Many in the industry expect the first approvals could come as early as this year.