The year 2024 has seen a surge in exchange-traded fund inflows, surpassing previous monthly records. Managers are closely monitoring this trend as they anticipate the impact of the money market fund boom on ETF inflows by the end of the year.
Nate Geraci, president of The ETF Store, highlighted the significance of the $6 trillion plus parked in money market funds. He believes that this is the biggest wild card for the remainder of the year and could potentially drive flows into REIT ETFs and the broader ETF market.
According to the Investment Company Institute, total assets in money market funds have reached a new high of $6.24 trillion. This increase in assets has been attributed to investors waiting for a Federal Reserve rate cut, leading to higher returns on money market funds.
Matt Bartolini from State Street Global Advisors indicated that as rates fall, capital that was previously held in cash could flow back into the marketplace. This shift in capital is expected to move into stocks, other higher-yielding fixed income areas, and parts of the ETF market.
Bartolini also mentioned the potential for increased inflows into gold ETFs, noting the significant inflows seen in the last three months. This trend, coupled with a strong finish in the previous year, indicates a bright future for the overall industry.
Geraci expressed optimism regarding the potential benefits for large, megacap ETFs. He believes that as ETF inflows approach the 2021 records of $909 billion, there is a promising outlook for continued investor allocation and potential record-breaking ETF inflows if stocks remain stable.
The impact of the money market fund boom on ETF inflows is a significant trend to watch in 2024. With record-high assets in money market funds and the potential for capital to flow back into the marketplace, the ETF industry stands to benefit from this shift in investor behavior. As managers closely monitor these developments, the future of ETF inflows remains promising, particularly for large, megacap ETFs.