##  [# ETF Flows Surge, Shrug Off Small-Cap Exodus: State Street](/sections/news/etf-flows-surge-shrug-small-cap-exodus-state-street) 

 

# ETF Flows Surge, Shrug Off Small-Cap Exodus: State Street

 

 

- Investment inflows reached $121B in July, pushing the 2025 total to $677B.
- Small-cap ETFs saw a record seventh-consecutive month of outflows at $6.6B.
- Bond fund inflows hit $200 billion at the fastest pace ever, targeting $380B by year-end.



 

 

 

 

 [![DJ](/sites/default/files/styles/author_image_icon/public/2024-07/5.png?itok=LA-jevm_)](/authors/dj-shaw) 

[By DJ Shaw ](/authors/dj-shaw)

 Aug 06, 2025

 Edited by: David Tony

 

 

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Investment inflows surged to $121 billion in July, maintaining a record-setting pace that could deliver $1.3 trillion in annual exchange-traded fund flows despite persistent weakness in small-cap strategies, Matthew Bartolini, head of Americas ETF research at State Street Investment Management, wrote in a recent report.

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](/topics/equity) strategies capturing $81.5 billion and [fixed income](/topics/fixed-income) taking $23.8 billion in July, according to [State Street Corp. (STT)](/stock/STT). [Alternative](/alternative-etfs) strategies attracted $12.6 billion, while [commodities](/topics/commodity) 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.

 
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## Record Inflows Mask Small-Cap Weakness

U.S. [small-cap ETFs](/topics/small-cap) 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](/topics/large-cap) 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](/topics/bond) 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](/topics/high-dividend-yield) strategies, while [investment-grade corporate bonds](/topics/investment-grade-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](/topics/active-management) 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](/topics/artificial-intelligence) strategies that captured $1.3 billion, Bartolini found.



 

 

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 [ DJ Shaw Finance Reporter ](/authors/dj-shaw) 

 

 

  A graduate of The University of Texas, Arlington with a BA in Communications, DJ has covered retirement plans, mortgage news, and financial advisor…   [View Bio](/authors/dj-shaw)

 



 

 


 Related Topics  [Fixed Income](http://www.etf.com/topics/fixed-income) 

 [Commodities](http://www.etf.com/topics/commodity) 

 [Alternative](http://www.etf.com/topics/alternative-etfs) 

 [Bond](http://www.etf.com/topics/bond) 

 [Artificial Intelligence](http://www.etf.com/topics/artificial-intelligence)