2023 ETF Flows Report

Hundreds of billions flowed into ETFs last year. Could recent trends make 2024 a transitional year?

Key Takeaways

  • A record number of ETFs were launched in 2023.
  • Stock ETFs pulled in massive net flows, while government bond ETFs were in demand amid rising rates.
  • Mutual funds converting to ETFs and the dramatic growth in active ETFs could be trends to watch in 2024.

A strong last 3 months of 2023 helped propel ETFs to billions more in net flows (i.e., inflows less outflows). Will that momentum continue into 2024? Here were the biggest 2023 trends in ETF flows and where the momentum is now.

Stock ETF flows surge into year-end

It was shaping up to be a somewhat ho-hum year for ETF flows, relatively speaking. Then, investors flooded into ETFs during a festive Q4 when the market rally intensified throughout the holidays.

In 2023, ETFs gathered nearly $600 billion in net flows (see 2023 US-domiciled ETF flows chart below). While that's less than some previous years, including 2021's nearly $1 trillion record haul, it still shows the massive, sustained momentum behind ETFs.

ETF Flows chart

Stock ETF flows in particular surged during the last quarter of 2023, accumulating $185 billion in net flows (see 2023 flows by quarter chart below). When coupled with a robust $67 billion in fixed income (i.e., bond) ETF flows, Q4 was by far the best quarter for flows in 2023. That followed relatively slow, yet positive, flows for stock and bond ETFs in the first 3 quarters.

flows by quarter chart

Fixed income ETFs (which are made up almost entirely of bond ETFs) saw demand dip for most of 2023 and reached a multiyear low in Q3. The Q4 surge reversed that trend, driven primarily by government bond ETFs, which had another strong year of inflows ($103 billion). That makes $228 billion gathered by government bond ETFs over the last 2 years (compared to just $38 billion the previous 2 years).

Big tech led sector flows

2023 investment performance was largely dominated by a handful of mega caps—including the "Magnificent 7" and several other big tech companies. ETF investors rode this trend, as technology ETFs ($6 billion) led sector flows (see 2023 US sector ETF flows chart below).

Meanwhile, most defensive sectors including health care (—$11 billion), consumer staples (—$5 billion), and utilities (—$2 billion) saw outflows. Notably, energy sector ETFs also had significant outflows (—$8 billion). Energy was one of the worst-performing sectors in 2023, after being the best-performing sector the previous 2 years.

sector flows chart

Essentially, sector ETF flows flipped from the year before, mirroring the price performance of sectors. Cyclical sectors—excluding energy and materials—accumulated positive flows, while defensive sectors generally saw outflows.

More conversions and active ETFs in 2024?

While low-cost, index-tracking ETFs continued to dominate flows—as they have for decades—2 new trends strengthened in 2023: Mutual funds converting to ETFs and the growth of active ETFs.

More mutual funds (which saw outflows of roughly half a trillion last year) converted to ETFs than every other year combined. Since March 2021, over 50 mutual funds with greater than $60 billion in assets have converted to ETFs. It's widely expected that more mutual funds will convert to ETFs in 2024.

Meanwhile, there was a wave of momentum behind actively managed ETFs, which are ETFs that intend to outperform a benchmark. Of the record 501 ETF launches in 2023, 385 were actively managed (see Number of passive vs. active ETF fund launches chart below). That helped buoy active ETF fund flows to an annual record, claiming almost 22% of the nearly $600 billion in net flows during the year. It also appears actively managed ETF growth is likely to continue in 2024.

fund launches chart

Looking for ETFs?

ETF flows can be a useful tool to help identify market trends, and to see where investors are broadly putting their money. 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.

Visit our ETF List Page to View Fidelity's Full ETF offering.


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