ETF Flows Surge, Shrug Off Small-Cap Exodus: State Street
The July inflows pushed total 2025 ETF flows to $677 billion, keeping the industry on track for its first trillion-dollar year, according to the report. Total ETF assets have already reached a record $11.8 trillion.
Behind the Surge
The surge comes as global equities gained 1.3% in July, with U.S. stocks climbing 2.2% and international markets declining 0.4%, Bartolini noted in the report. Bonds fell 0.3% as rates rose on stubborn inflation and deficit concerns.
ETF flows broke down across asset classes with equity strategies capturing $81.5 billion and fixed income taking $23.8 billion in July, according to State Street Corp. (STT). Alternative strategies attracted $12.6 billion, while commodities added $2.3 million.
Non-U.S. equity ETFs captured 30% of equity flows despite representing just 19% of assets, marking a reversal from 2024 when U.S. equity ETFs took 86% of all equity flows, according to Bartolini, signaling a shift toward international diversification.
Record Inflows Mask Small-Cap Weakness
U.S. small-cap ETFs lost $6.6 billion in July, marking their seventh-consecutive month of outflows and bringing year-to-date redemptions to $20 billion, according to the report. The streak represents a record for sustained negative activity in the category.
Rolling three- and six-month small-cap flows have reached their worst levels on record, coinciding with small-caps lagging large-caps by 9% this year and 17% over the past 12 months, State Street data show.
The outflows reflect headwinds from elevated interest rates, uncertain macro conditions with potential growth-negative tariff impacts and weak profitability trends, as 34% of small-cap companies remain unprofitable, Bartolini wrote.
Bond Inflows Hit Record Pace
Bond ETF flows reached $200 billion for 2025 in record time, hitting the milestone in July compared to September in 2024, Bartolini said. The firm projects bond ETF flows could reach $380 billion by year-end, surpassing 2024's record of $300 billion.
Credit sector bond ETFs added $2 billion in July, led by $3 billion into high-yield strategies, while investment-grade corporate bonds experienced outflows, according to the data. Convertible bond ETFs posted $572 million in inflows, their largest monthly total in over two years.
Active ETF strategies continued their dominance with $45.3 billion in July inflows, bringing year-to-date totals to over $263 billion and representing 39% of all ETF flows, the report showed. Low-cost passive strategies captured $321 billion, or 47% of flows.
Thematic ETFs rebounded with $3.8 billion of flows in July, the largest monthly inflow since 2021, driven primarily by robotics and artificial intelligence strategies that captured $1.3 billion, Bartolini found.Permalink | © Copyright 2025 etf.com. All rights reserved
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