Industry Updates

ETFs with the biggest inflows and outflows in Q1 2024

Overnight rate swaps shone as fixed income flows slowed

Theo Andrew

ETF money

Investors unperturbed by overconcentration fears continued to pour into US equity ETFs over the first quarter of 2024 as bond inflows slowed.

ETFs tracking the S&P 500 dominated the inflows charts, with the iShares Core S&P 500 UCITS ETF (CSPX) raking in $4.7bn inflows in Q1, followed by the SPDR S&P 500 UCITS ETF (SPY5) which saw $3.4bn inflows, according to data from ETFbook.

The Vanguard S&P 500 UCITS ETF (VUSA) recorded $1.5bn inflows and the JPM US Research Enhanced Index Equity (ESG) UCITS ETF (JURE) continued its impressive run, booking inflows of $1.2bn.

It comes as UCITS ETFs tracking the S&P 500 have surpassed $250bn in assets under management (AUM) in April, ETFbook data found.

Investors looking to double down on the AI boom, driving much of the return in the flagship US index, turned to the Xtrackers Artificial Intelligence & Big Data UCITS ETF (XAIX). The ETF recorded $883m inflows over the quarter, taking its AUM to $2.9bn.

Investors embrace higher for longer

While equities continue to shine, markets have revised down their rate cut expectations over the quarter.

The result has been less demand for fixed income – bond ETF inflows fell from $8.4bn in January to $1.3bn inflows in March – and increased interest in an elevated rates play.

Highlighting this, the $7.3bn Xtrackers EUR Overnight Rate Swap UCITS ETF (XEON) saw inflows of $2.1bn in Q1, adding to the $3.6bn investors poured into the ETF in Q4 2023.

Offering exposure to the interbank rate for one-day loans between 28 EU panel banks in euros, calculated by the European Central Bank, XEOX has shot to life in the current high-interest rate environment.

Demand for fixed income was seen in the ultra-short duration space, with the iShares $ Treasury Bond 0-1yr UCITS ETF (IB01) garnering flows of $1.4bn.

However, other short-duration ETFs including the Xtrackers Eurozone Government Bond 1-3 UCITS ETF (DBXP) and the iShares $ Treasury Bond 1-3yr UCITS ETF (IBTS) recorded $747m and $346m outflows, respectively.

The slower rate cut narrative meant investors pulled $560m from the Amundi US Curve Steepening 2-10Y UCITS ETF (SPTU) and $332m from the Invesco US Treasury Bond 7-10 Year UCITS ETF (TRDX).

Meanwhile, the iShares Core € Corp Bond UCITS ETF (IEAC) also saw significant outflows of $1.5bn.

Elsewhere, high yield ETFs had a strong quarter with the iShares € High Yield Corp Bond UCITS ETF (IHYG) posting inflows of $1.4bn as investors shrugged off a higher default rate risk of the current interest rate environment.

Last month, Wei Li, global chief investment strategist at the BlackRock Investment Institute, said: “We favour high yield. We see broader credit spreads staying tight for now given the supportive risk-taking backdrop and strong demand for new issuance of US investment grade and US high yield corporate bonds.”

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