The ETF Flowdown: Halfway Through 2025

We’re at the halfway point of 2025, and once again, markets are hovering right back around all-time highs. For the moment, tariff talk has cooled, and a new trade deal with Vietnam has crystallized the record rally in U.S. equities. Total equity flows posted a strong first half, but the intensity of day-to-day inflows has cooled significantly since the April market low. But that’s not stopping ETF inflows from heading for another record year. Active ETFs have accounted for nearly 40% of the flows and more than 90% of new issuance as of the end of June.Equities: Broad-Based Index BehemothsGiven the huge snapback, it’s no surprise broad-based plain-vanilla equity ETFs just keep on racking up inflows. Even before the first quarter was up, the Vanguard S&P 500 ETF (VOO A) had already solidified its lead as the single largest ETF in the world. And it’s is topping the flow charts, with $60 billion in net inflows year-to-date, reaching more than $680 billion in total assets.Cost Remains KingAlso worth noting: The SPDR Portfolio S&P 500 ETF (SPLG A) has not missed a beat after dominating last year. The cheapest of its kind, that fund has drawn in $15 billion in net inflows this year ­­­­­­—­­­ roughly a fifth of the fund’s total assets — as investors keep their cost-conscious hats on. It’s been a similar story with the Invesco NASDAQ 100 ETF (QQQM B), the cheaper alternative to the much-loved Invesco QQQ Trust (QQQ B+).Smart Beta Strategies SizzleSystematic, factor-based strategies (aka smart beta) have also done well. The Invesco S&P 500 Momentum ETF (SPMO B+) has added $4 billion in 2025, accounting for nearly half of all assets. Along a similar vein, the iShares U.S. Equity Factor Rotation Active ETF (DYNF B+) has brought in $4 billion in net inflows. That’s almost a quarter of total assets. The fund employs a dynamic rotation strategy, actively allocating to factors like momentum, quality, value and low volatility.Active ThematicThematic investing is making a decisive comeback in 2025. As the style most ripe for reinvention, the thematic of today is very different from the thematic of 2021, which largely entailed cannabis and meme stocks. Actively managed thematic ETFs like the iShares U.S. Thematic Rotation Active ETF (THRO) are thriving. THRO has netted nearly $5 billion, or roughly 95% of the fund’s total assets, just this year. Meanwhile, AI continues to permeate the investing landscape across every conceivable sector and industry. The iShares AI Innovation and Tech Active ETF (BAI) has gained north of $2 billion in assets since launching last October and was recently added to BlackRock’s model portfolios.Finally Going GlobalInvestors have eagerly eyed the strength of international markets. Every year, we’ve wait for international ETFs to have their time in the sun. The U.S. exceptionalism story has faltered, but record runs and recency bias remain. All this comes as the U.S. dollar continues to crumble at the fastest pace since 1973.At VettaFi’s Midyear Market Outlook Symposium, nearly 40% of advisors said they were most keen on investing in Developed Europe over the next three months. European stocks and emerging markets have outshone the U.S. this year on a performance basis. But investors have been severely underweight these markets. They’ve started to diversify abroad but just in smaller increments. Still, more than $5 billion has poured into the Vanguard Europe ETF (VGK A) and nearly $6 billion into the iShares Emerging Markets ETF (IEMG A) — plus another $2 billion going into the Avantis Emerging Markets ETF (AVEM B+). Roughly $2 billion also poured into the Dimensional International Value ETF (DFIV A), which accounts for nearly 20% of the fund’s total assets. There is some debate about whether the outperformance will continue. Even after the recent rebound, developed market benchmarks, China, and emerging markets have all outperformed the S&P by double digits. The tariff tug-of-war has also put a damper on sentiment. Many are still holding out until the July 9 deadline for the so-called Liberation Day tariffs to expire. So far, the UK remains the only European country to secure a trade deal. The iShares MSCI Germany ETF (EWG B) has amassed nearly $2 billion in inflows. That’s almost 60% of the fund’s total assets. It’s difficult to say whether a more accelerated, dramatic shift will take hold. But for now, there’s a lot of optimism around those areas.Fixed Income: Staying Short & Scooping Up Securitized DebtFixed income ETFs are having another banner year. They’re on pace to smash last year’s record $300 billion in net inflows. Both fiscal and monetary policy uncertainties have bred the most volatile bond market we’ve seen since COVID-19. Investors are still holding firm at the shorter end of the Treasury yield curve. Short duration products like the iShares 0-3 Month Treasury Bond ETF (SGOV A) and the JPMorgan Ultra-Short Income ETF (JPST A) have seen monster inflows as a result.The unpredictable nature of rates has also driven strong interest in securitized debt instruments, such as CLOs and mortgage-backed securities. This is evidenced by strong inflows into the $22 billion Janus Henderson AAA CLO ETF (JAAA A-) and the PGIM AAA CLO ETF PAAA) which has accrued half of its total assets this year alone. Similarly, the Schwab Mortgage-Backed Securities ETF (SMBS) has attracted almost all its $5 billion in assets in 2025. Fidelity offers its own Investment Grade Securitized ETF (FSEC A), which rotates among agency mortgage-backed securities, CLOs, and consumer asset-backed securities. This has proven attractive as investors look to diversify beyond corporates and Treasuries amid tighter spreads.Record Run for GoldThe precious metal has far and away been the standout asset class of 2025, up nearly 30% as safe haven interest surges. Gold prices topped $3,500 an ounce for the first time ever, prompting massive inflows into the SPDR Gold Shares (GLD A-) and the iShares Gold Trust (IAU A-). Crypto certainly deserves honorable mention here as well. The iShares Bitcoin Trust (IBIT C+) has notched a spot among the top five most popular ETFs year-to-date,  grabbing $15 billion — or roughly 20% of its $74 billion — in total AUM. As we cross the midway point of 2025, ETFs continue to shape the investment landscape with record-breaking flows, evolving strategies, and shifting investor preferences. The ongoing interest in gold and the resurgence of international equities underscore a significant shift in asset allocation preferences as market conditions evolve. As we look ahead, investors must stay attuned to these trends and adapt accordingly to capitalize on potential opportunities in this ever-changing landscape. For more news, information, and analysis, visit VettaFi | ETFDB.