The exchange-traded fund industry has witnessed a surge in inflows in 2024, surpassing monthly records. Managers are closely monitoring the potential impact of the money market fund boom on ETF inflows for the rest of the year. According to Nate Geraci, president of The ETF Store, the $6 trillion plus parked in money market funds presents a significant wild card factor that could shape the market dynamics in the coming months. He emphasized the importance of keeping an eye on flows into REIT ETFs and the broader ETF market as a possible catalyst.
Rising Assets in Money Market Funds
Recent data from the Investment Company Institute revealed that total assets in money market funds have reached a new high of $6.24 trillion. This milestone comes as investors await a potential Federal Reserve rate cut, which could impact the yield on money market funds. Matt Bartolini, head of SPDR Americas Research at State Street Global Advisors, highlighted the correlation between falling rates and the movement of capital from cash reserves to equities, higher-yielding fixed income assets, and various segments of the ETF market.
Bartolini pointed out that gold ETFs have experienced significant inflows in recent months, indicating a growing interest in the precious metal as an investment option. He expects this trend to continue, buoyed by strong performance in the previous year. On the other hand, Geraci emphasized the potential benefits for large, megacap ETFs amidst the market transition. He expressed optimism about ETF inflows reaching or surpassing the previous record of $909 billion set in 2021, barring any unforeseen market downturns.
Looking ahead, both Geraci and Bartolini foresee a positive outlook for the ETF industry, driven by shifting investor preferences and market dynamics. While Geraci anticipates continued investor allocation to ETFs as long as stock markets remain stable, Bartolini highlighted the potential for growth in various sectors, including gold ETFs. They believe that the industry is poised for further expansion, with ETF inflows potentially breaking records in the near future, provided market conditions remain favorable.