ETF Exodus: 2024 Begins With Sharp Cash Outflows, Reversing 2023's Inflow Surge

In a stark turnaround, exchange traded funds (ETFs) have seen net outflows in the opening weeks of 2024, contrasting with a strong performance through much of 2023.

During the first week of 2024, the ETF market saw net outflows of $2.047 billion, while last week drew net inflows of $944 million. Thus, in the first two weeks of 2024 the global ETF market saw net outflows of $1.103 billion, according to data from Bank Of America.

BofA said the outflows were of all types, including large- and mid-cap and broad market ETFs, while sector ETF outflows were led by real estate. The Vanguard Real Estate ETF VNQ, which tracks U.S. residential and commercial real estate investment trusts, is down 3% in January.

The turnaround reflects overall equity market sentiment in the first couple of weeks of 2024, which has been clouded by rising geopolitical tensions in the Middle East and a market re-think on the pace and number of rate cuts the Federal Reserve is expected to make.

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ETFs Saw Strong Inflows In 2023

Meanwhile, data published by Lipper showed the global exchange traded fund market enjoyed a strong year of inflows and growth in assets under management in 2023.

The global ETF industry saw overall net inflows of $870.1 billion — with $585.7 billion of the total coming from U.S. investors alone. In Europe, Irish investors put in a strong effort, with $129.5 billion of the total inflows.

Equity ETFs were, by far, the most popular, accounting for 77% of total assets under managements, while bond ETFs accounted for 19% and commodity products 2%. Of the equity ETFs, 94% of AUM were in index tracking products, while 6% were in actively or semi-actively managed products.

BlackRock Inc BLK continued to stand out as the top global promoter of exchange traded funds in 2023, with its iShares series of offerings reaching over $3.5 trillion in assets under management — more than a third of the company’s total AUM of $10 trillion.

In second place was Vanguard with $2.5 trillion in AUM and third was State Street Global Advisors STT — which promotes the SPDR series of ETFs — with $1.3 trillion AUM.

Crypto-Related ETFs Boosted in 2023

We’ve seen how the broad market has performed but what about individual ETF performance?

Not, surprisingly — given the gains for cryptocurrencies during 2023 — crypto and blockchain-related ETFs were the best performing.

According to data from Morningstar, with a standout 255% return, the top performing ETF over 2023 was the VanEck Digital Transformation ETF DAPP, which tracks listed stocks such as crypto miners and exchanges. Second was the Global X Blockchain ETF BKCH which returned 253% over the year.

Both are down in the opening weeks of 2024.

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