The Big Picture
Investors closed out the year with a distinct “barbell” approach, aggressively targeting specific pockets of high-beta opportunity while simultaneously fortifying portfolios with defensive fixed income and defined outcome strategies. While U.S. equities faced a headline $23 billion outflow week led by technology, much of this activity represented residual outflows from special rebalances the previous week to facilitate tax-efficient custom creates and redeems. Looking past these technical moves, capital rotated decisively into global markets, with Global Ex-U.S. ETFs capturing over $11 billion in new assets. A surge in precious metals sparked rallies across commodity and thematic channels, with silver strategies delivering some of the week’s most explosive returns. Meanwhile, taxable fixed income continued its robust growth streak, adding nearly $9 billion, as investors paired safety with speculation in single-stock and leveraged funds.
Equity
The U.S. Size & Style channel saw headline net outflows of $23.00 billion, a figure largely distorted by residual outflows from special rebalances the previous week to facilitate tax-efficient custom creates and redeems. Despite this technical pressure, the longer-term trend remains robust with over $549 billion in year-to-date flows. Performance was broadly positive, led by U.S. Large Cap Growth which returned 1.41%, while U.S. Small Cap Value lagged with a modest 0.16% gain. Vanguard proved to be the flow leader, gathering $8.1 billion, while iShares experienced significant outflows of $13.7 billion from its suite.
Global Size & Style ETFs saw net inflows of $290 million, pushing year-to-date flows past the $20 billion mark. Equity performance was led by Global Large Cap Growth, which returned 1.51% for the week, while Global Large Cap Value lagged at 1.00% but retains the top spot for year-to-date performance. Vanguard solidified its leadership position by gathering $451 million in weekly inflows, while the Pacer Global Cash Cows Dividend ETF (GCOW) faced the largest redemptions.
This channel experienced significant positive momentum, capturing $11.69 billion in net inflows as total assets hit approximately $1.516 trillion. Emerging Market categories led performance, with the Emerging Large Cap segment returning 1.87%, driven by funds like the Nomura Focused Emerging Markets Equity ETF (EMEQ) which gained nearly 5%. The Vanguard Total International Stock ETF (VXUS) was the primary beneficiary of capital, securing over $4 billion in new assets for the week.
South Korea strategies surged this week, with the Franklin FTSE South Korea ETF (FLKR) gaining 5.88%, helping the Asia-Pacific category post a 1.38% return. The channel attracted $408 million in net inflows, with the Eurozone category leading the way by gathering $378 million. Conversely, the Americas category faced headwinds, recording outflows of $264 million, while funds like the JPMorgan BetaBuilders Canada ETF saw significant exits.
Materials momentum led the sector landscape with a 2.31% return. While the Information Technology sector showed a massive $4.15 billion in outflows, these redemptions were primarily residual effects from special rebalances the previous week to facilitate tax-efficient custom creates and redeems rather than a fundamental shift in sentiment. Tech managed a 1.52% gain for the week, remaining the clear year-to-date leader with a 29.22% return. Consumer Discretionary and Real Estate were the bright spots for capital raising, attracting $327 million and $311 million in inflows, respectively.
Resource-oriented themes dominated the week, with Precious Metals and Natural Resources categories returning 4.66% and 3.13%, respectively. The Sprott Nickel Miners ETF (NIKL) was a standout performer, jumping 9.70%, while FinTech strategies lagged with a -1.49% decline. Flows followed performance, as Natural Resources attracted $732 million in new capital, while broad Multi-Sector thematic funds faced outflows of $473 million.
Hedged strategies drove steady momentum in the Specialty channel, capturing $76 million of the $81 million in total net inflows. The Equity: Specialty – Hedged category also led performance with a 1.05% return, extending its year-to-date lead to 13.11%. The TrueShares Convex Protect ETF (PVEX) was the clear flow leader, while Market Neutral strategies like the AGF U.S. Market Neutral Anti-Beta Fund faced modest outflows.
Fixed Income
Taxable Fixed Income saw massive activity with $8.66 billion in net inflows, led by Investment Grade credit which attracted $7.21 billion. International and Emerging Market debt led performance, returning 0.77% and 0.46% respectively, while interest-rate sensitive segments like Preferred Stock lagged. iShares and Vanguard continued their dominance, commanding a combined market share of over 64% and gathering the bulk of new assets.
The Municipal ETF channel reached a new milestone of $183 billion in AUM, driven by a $1.64 billion inflow surge. Investors favored the Intermediate category, which gathered $715 million, and Short duration funds, which added $674 million. Performance was positive across the board, led by Intermediate and Long duration segments returning 0.08%, while the JPMorgan Ultra-Short Municipal Income ETF (JMST) was the top individual gatherer of assets.
Specialty Fixed Income attracted $1.62 billion in net flows, dominated almost entirely by the Defined Maturity category which pulled in over $1.6 billion. Performance was mixed, with Defined Maturity and Maturing Ladder strategies leading at 0.16%, while Interest Rate Volatility funds lagged with a -0.30% return. iShares maintained its stronghold on the channel, controlling nearly 58% of the market share.
Commodities
Commodity ETFs gathered $3.09 billion in weekly flows as Precious Metals rallied 6.59%, with funds like the abrdn Physical Platinum Shares ETF (PPLT) surging over 17%. The SPDR Gold Shares (GLD) led all ETFs with $2.6 billion in inflows, while Carbon Credits saw the most significant outflows. Shipping Freight was the notable laggard for the week, dropping -6.35% despite its strong year-to-date performance.
Currencies & Crypto
The Australian Dollar (AUD) led currency performance with a 1.64% gain, contributing to a strong year-to-date return of nearly 10% for the category. Overall flow activity was stalled with a minor net outflow of $2 million, though Short USD strategies attracted modest capital. Multi-strategy funds lagged significantly, declining -1.43% for the week.
Bitcoin held steady relative to the broader digital asset market with a flat -0.15% return, while Altcoins struggled, dropping -3.81%. The channel experienced significant outflows of $753 million, with Bitcoin ETFs shedding $673 million. Despite the selling pressure, Franklin’s XRP ETF and the Grayscale Ethereum Mini Trust managed to buck the trend with positive inflows.
Alternatives
Short Volatility strategies outperformed this week, gaining 1.28%, while Long Volatility funds dropped -2.88%. Interestingly, investors bought the dip in Long Volatility, pouring $68 million into the category despite the negative performance. Managed Futures also had a strong showing, returning 1.42%, while Multi-Strategy funds faced the largest outflows of $59 million.
Non-Traditional
The ProShares Ultra Silver ETF (AGQ) soared 30.00% as precious metals strategies led performance, while Inverse Silver funds faced steep declines. The channel saw a slight net outflow of $25 million, though Single Stock leverage products gathered $266 million. GraniteShares topped the issuer flow table with $300 million in inflows, while T-Rex saw significant outflows.
The Buffer ETF channel gathered $463 million in net inflows, with the FT Vest U.S. Equity Moderate Buffer ETF – December (GDEC) taking the top spot with $148 million. Commodity-focused buffers led performance with a 6.79% return, while crypto-linked buffers lagged. FT Vest continues to dominate the space, managing nearly 49% of the channel’s assets.
Nvidia bulls picked their fighter this week, piling $283 million into GraniteShares’ NVDL while pulling $159 million from T-Rex’s NVDX. Volatility created massive dispersion, with the 2X Short BitMine ETF (BMNZ) skyrocketing over 21% while the 2X Long DJT ETF (DJTU) cratered over 28%. Overall, the channel absorbed a net $171 million as traders chased beta and volatility into year-end.
Synthetic Income strategies attracted $397 million in net flows, led by the NEOS Nasdaq 100 High Income ETF (QQQI) which gathered $307 million. Silver and Gold enhanced income strategies dominated performance, with the Kurv Silver Enhanced Income ETF (KSLV) surging over 18%. Conversely, single-stock option strategies experienced outflows of $94 million.
Multi-Asset
Capital Group dominated flows with $91 million in net inflows, largely into its Core Balanced ETF (CGBL). Performance was led by the Alternative Asset Sleeve and Real Assets categories, which gained 2.12% and 2.01% respectively. The channel brought in a total of $156 million for the week, while Target Risk – Global Macro strategies faced outflows.
Disclosures
This material is for informational purposes only and should not be considered investment advice. All investments, including ETFs, involve risk, including the possible loss of principal. Investors should consider their investment objectives, risks, charges, and expenses carefully before investing.
This analysis was developed by the team at ETF Action. We leverage advanced AI tools to assist in the drafting and refinement of our content, based on our expert prompts, direction, and final review.
