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ETF flows update: Q1 2022

Key takeaways

  • ETF inflows are off the record pace set in 2021, yet still registered the second highest Q1 net flows in the past 8 years.
  • Stock ETFs took in a massive $154 billion in flows for the quarter. Government bond ETFs dominated a slow quarter for fixed income flows.
  • Gold ETF flows gained momentum amid a wild commodity market.

The war in Ukraine, scorching inflation, and other investing risks couldn’t stop ETF flow momentum in Q1. After 2021 saw record ETF net flows (i.e., inflows minus outflows) of over $900 billion, they had a slower start to 2022 before picking up pace in the latter half of the first quarter of the year.

Here were the most recent trends in ETF flows.

Stock ETF flows lead

ETFs' popularity continues to grow as an investing and trading vehicle. Consider this: ETFs accounted for 33% of total US exchange volume ($15 trillion) in Q1.* That's a record for ETFs’ percentage of total exchange volume. Moreover, fund flows continue to pour into ETFs.

But it didn’t look like it would be smooth sailing at the start of 2022 when, across all asset classes, ETF flows had a rocky start. Inflation, economic growth worries, and looming interest rate hikes rattled markets and fund flows. Momentum got going in February, and fund flows in March were the third most ever for that month, totaling $93 billion. All this while the war in Ukraine unfolded, the Fed raised rates to fight inflation, and some key indicators were flashing warning signs about the global economy.

And once again, it was stock ETF flows that led the pack. Specifically, US stock ETFs accumulated more than $110 billion in net flows during the first quarter of 2022 (see Q1 2022 US-domiciled ETF flows in billions chart below). While the total amount of equity (i.e., stock) ETF flows this quarter ($154 billion) were down significantly from last year’s blockbuster pace, when stock ETF flows grew a record-shattering $209 billion during Q1, it's still a robust number historically and by far the most of any category thus far this year.

This chart is described in the text above.
Source: Bloomberg, as of 03/31/2022. DM/Global equity = Developed market/Global equity. EM equity = Emerging market equity.

Among the 11 stock market sectors, cyclicals generally outperformed defensive sectors, in terms of net flows (see US Sector ETF flows in billions chart below). Technology ($6 billion) and energy ($4 billion) attracted the most net flows, while consumer discretionary ($4 billion) saw strong outflows in Q1. Clearly, higher inflation and economic growth concerns shifted investor choices.

US sector ETF flows in billions

This chart is described in the text above.
Source: Bloomberg as of 03/31/2022.

Meanwhile, fixed income (i.e., bond) ETFs had a relatively tough start to the year. Of the bond categories that had positive flows, government/treasury bond ETFs dominated ($19 billion), seeing the largest quarterly inflow since the fourth quarter of 2018 ($27 billion). On the flip side, high-yield ETFs saw $12 billion in outflows in Q1—the worst quarter ever for the category.

Outside of stock and bond flows, commodity flows had an understandably tumultuous Q1. Several commodity prices skyrocketed to all-time highs amid the outbreak of war (with many subsequently plunging back to pre-war levels), and commodity ETF flows saw similar volatility. On the positive side, gold ETFs took in $10 billion of inflows for the quarter, representing 55% of all commodity flows. On the other hand, oil and gas commodity ETFs had nearly $300 million in outflows during Q1.

Other interesting trends

16 mutual funds (from 6 different issuers) with over $40 billion in assets converted to ETFs in 2021. Those ETFs attracted $4.7 billion in net flows since converting, with 12 out of 16 funds converted seeing net inflows. Another 7 mutual funds (worth $18 billion) have announced plans to convert in 2022.

An interesting aspect of these conversions is that the converting funds can bring over their track record and assets, unlike a newly launched ETF. The funds can also provide potential tax efficiency and a reduction in management fees due to the ETF structure. 

Exploring the ETF universe

Of course, recent or historical trends are not necessarily a harbinger for the future. Moreover, it is generally inadvisable to take action based on any one piece of information, including fund flow data. Nevertheless, ETF flows can be a useful tool to help identify market trends, to see where investors are broadly putting their money.

If you are exploring the ETF universe, the key is to find those that align with your objectives and risk constraints, regardless of the trend in flows. One tool that may be of use is Fidelity's ETF Screener, which can quickly sort through a lot of data based on the filtering selections you make. You can search for ETFs using a variety of characteristics, like the fund's objectives, fundamentals, technicals, performance, volatility, trading characteristics, tax considerations, and analyst ratings.

Why follow fund flows?

Tracking fund flows can help you evaluate which parts of the market may have momentum and can be useful if you incorporate trends and patterns in your analysis. You can assess fund flows by asset category, region, and objective, among other characteristics. Additionally, if you're a long-term investor, you might look at annual or multiyear trends. If you have a shorter investment horizon, you might track weekly, monthly, or quarterly fund flows.

Find the right ETF for you

Use our screener to identify ETFs and ETPs that match your investment goals.

More to explore

Exchange-traded products (ETPs) are subject to market volatility and the risks of their underlying securities, which may include the risks associated with investing in smaller companies, foreign securities, commodities, and fixed income investments. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks, all of which are magnified in emerging markets. ETPs that target a small universe of securities, such as a specific region or market sector, are generally subject to greater market volatility, as well as to the specific risks associated with that sector, region, or other focus. ETPs that use derivatives, leverage, or complex investment strategies are subject to additional risks. The return of an index ETP is usually different from that of the index it tracks because of fees, expenses, and tracking error. An ETP may trade at a premium or discount to its net asset value (NAV) (or indicative value in the case of exchange-traded notes). The degree of liquidity can vary significantly from one ETP to another and losses may be magnified if no liquid market exists for the ETP's shares when attempting to sell them. Each ETP has a unique risk profile, detailed in its prospectus, offering circular, or similar material, which should be considered carefully when making investment decisions. ETFs are subject to market fluctuation and the risks of their underlying investments. ETFs are subject to management fees and other expenses. Past performance is no guarantee of future results. The Fidelity ETF screener is a research tool provided to help self-directed investors evaluate these types of securities. The criteria and inputs entered are at the sole discretion of the user, and all screens or strategies with preselected criteria (including expert ones) are solely for the convenience of the user. Expert Screeners are provided by independent companies not affiliated with Fidelity. Information supplied or obtained from these Screeners is for informational purposes only and should not be considered investment advice or guidance, an offer of or a solicitation of an offer to buy or sell securities, or a recommendation or endorsement by Fidelity of any security or investment strategy. Fidelity does not endorse or adopt any particular investment strategy or approach to screening or evaluating stocks, preferred securities, exchange-traded products, or closed-end funds. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from its use. Determine which securities are right for you based on your investment objectives, risk tolerance, financial situation, and other individual factors, and reevaluate them on a periodic basis. * All the data presented within are from Fidelity Investments and Bloomberg, as of 04/11/2022. For our purposes, we refer to funds, ETPs, and ETFs interchangeably. These data do not reflect mutual fund data, and investors who would like to monitor the entire fund flow universe may want to consider flows going into or out of mutual funds.

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