ETF, Mutual Fund Flows Rebounded Slightly Last Year

ETF, Mutual Fund Flows Rebounded Slightly Last Year

Inflows bounced to $79 billion after $370 billion of outflows in 2022, Morningstar said.

LucyBrewster310x310
|
Finance Reporter
|
Reviewed by: etf.com Staff
,
Edited by: Ron Day

U.S. mutual and exchange-traded funds inflows managed a small rebound last year, pulling in $79 billion in a reversal of the hundreds of billions in outflows from 2022, according to Morningstar. 

Last year’s total was still the lowest inflows in 30 years, Morningstar said in a new report. In 2023, investors pulled $370 billion from the funds. 

Recession fears and rising interest rates damped enthusiasm for volatile stocks and bonds, and many investors turned to safer investments like money-market funds and other cash-equivalent strategies whose yields surged past 5% range, from near zero, for the first time in years. 

Flows started turning positive in October, the report’s authors, Morningstar research analysts Adam Sabban and Ryan Jackson, wrote. Most of the inflows—about two-thirds—came in December, when confidence in a soft landing for the U.S. economy firmed up. In that month, $57 billion moved into ETFs and mutual funds, the report said.  

“While that represented a rebound from a historically poor 2022, it was equivalent to the second-lowest positive organic growth rate in Morningstar’s data,” they wrote.  

Despite positive inflows, the ETF and mutual fund industries have not fully recovered from 2022 when they saw a negative fund flows organic growth rate.  

The U.S. based data from Morningstar comes as ETFs reached a global milestone at the end of 2023—reaching more than $11.6 trillion in assets, breaking the previous record set the month prior in November 2023. Globally, investors poured $974.9 billion into ETFs, which $171.8 billion of those inflows being in December 2023 alone, according to research firm ETFGI.  

Passive Funds Top Active 

In addition, for the first time this year, assets in passively managed ETFs and mutual funds surpassed assets in passive funds, even as the number of active ETFs launched grows every year.  

“After steadily encroaching on active’s turf for years, passive funds closed 2023 with more assets,” Sabban and Jackson wrote. “While U.S. equity flows have long favored passive products, international-equity and bond-fund flows have followed suit, helping to get passive funds over the hump.”  

Perhaps unsurprisingly, investors still prefer ETFs over open-end funds in 2023 for their passive investing according to Morningstar.  

Contact Lucy Brewster at [email protected].  

Lucy Brewster is a finance reporter at etf.com covering asset managers, emerging technologies, and regulation. She hosts etf.com webinars and appears on Exchange Traded Fridays, etf.com’s flagship podcast. She previously was a finance fellow at Fortune Magazine where she covered markets, investment strategy, and venture capital. She has also been a freelancer writer at the publication Mergers & Acquisitions and a research fellow at the Historic Hudson Valley. 

She graduated from Vassar College in 2022 with a degree in History and was an editor of The Miscellany News, the college's award winning student run newspaper. 

Lucy lives in Brooklyn, NY, and in her free time she loves to run and find new recipes to cook.