The exchange-traded fund market is red hot.
On the heels of a record year for net inflows at $487 billion, the ETF market could surpass that amount in just a few weeks — with half a year to spare. According to FactSet Research Systems Inc., through June 21, U.S.-listed ETFs had captured $434 billion in net inflows and, unlike prior periods of intense asset growth for ETFs, this flow rally is remarkably broad.
"A majority of the flows is coming from ETF models, which have grown significantly in the past year," said Reginald M. Browne, New York-based principal at electronic market maker Global Trading Systems LLC. "While the risk-on rally began last year with a large-cap bias, there has been a shift to value this year. Many sector funds are reinflating, as well as commodities and raw materials ETFs, rolling all the way down to short-duration fixed income."
But Mr. Browne said that self-directed retail investors (even those who rally behind meme stocks) can't be overlooked as drivers of recent ETF activity. "They are a little bit less brand-driven and show no allegiance to any one issuer," he said. AT GTS, according to Mr. Browne, the ticket count from retail brokerage apps has doubled in the past year. Moreover, retail money market fund assets have been steadily declining, down $100 billion to $1.43 trillion since early February, according to Investment Company Institute data through June 16.
In an recent research note, Matthew Bartolini, head of SPDR Americas research at State Street Global Advisors in Boston, wrote that 66% of products had experienced net flows through April 30, the highest "hit rate" for the first four months since 2014 when the industry product count was 40% less.