In 2024, exchange-traded fund (ETF) inflows have already surpassed monthly records, indicating a positive trend in the investment landscape. Managers are keeping a close eye on the potential impact of the money market fund boom on ETF inflows as the year progresses.
Nate Geraci, president of The ETF Store, highlights the significant amount of money parked in money market funds, totaling over $6 trillion. This substantial sum presents a major unknown factor for the rest of the year, potentially influencing flows into different ETF sectors, including REIT ETFs and the broader ETF market.
The Investment Company Institute reports a new peak in total assets held in money market funds at $6.24 trillion. This surge in assets comes as investors await a Federal Reserve rate cut, which could impact the returns on money market funds, leading to a shift in capital allocation.
Matt Bartolini, from State Street Global Advisors, anticipates that as interest rates decrease, funds from money market accounts may flow into stocks, high-yield fixed income securities, and various segments of the ETF market. He specifically mentions the potential growth in gold ETFs, which have seen significant inflows in recent months, indicating a positive outlook for the industry.
Looking ahead, Geraci predicts that large, megacap ETFs could experience growth, and overall ETF inflows may approach the record set in 2021 at $909 billion. This optimistic view is contingent on the stock market maintaining stability and investors continuing to allocate resources to ETFs.
Overall, the impact of the money market fund boom on ETF inflows remains uncertain, but industry experts are cautiously optimistic about the potential for growth and capital migration into various investment vehicles. As market conditions evolve, it will be essential to monitor how investors navigate these changes and allocate their resources strategically.