Exchange-traded funds (ETFs) enjoyed another month of positive inflows in May as $124.2bn of fresh capital entered the market, according to new data from the London Stock Exchange Group.
Those domiciled in the US received the highest inflows throughout the month ($91.4bn), followed by ETFs in Ireland and Luxembourg, at $22.5bn and $6bn respectively.
Overall, the assets under managed by the global ETF industry increased from $11.9trn to $12.5trn throughout the month. The majority ($9.7trn) is held in equity ETFs, while a further $2.2trn is invested in fixed income.
This was reflected in May’s flows, with equity ETFs proving the most popular ($80.5bn) and bond ETFs trailing in at second ($37.2bn).
The report’s author and LSEG’s head of Lipper EMEA research Detlef Glow said potential interest rate cuts have inspired confidence in markets this year.
However, the Federal Reserve’s comments in the first quarter implying that cuts could come later than anticipated may have “caught some investors on the wrong foot”. This could have led to higher inflows in bond and money market ETFs, according to Glow.
He noted that the outlook for equity ETFs in general may not been as bright as it has been so far this year. Company earnings have been encouraging in the first quarter, but any failure to meet expectations could have volatile consequences on markets.
Glow added: “There were some companies which didn’t meet the expectations of the analysts and saw their stock prices declining respectively. These market reactions on lower-than-expected numbers showed how vulnerable the markets are.”
