Investors are flocking to actively managed exchange-traded funds (ETFs), and it’s not by accident. January saw a record-breaking $43 billion surge into these funds, marking their best organic growth rate in two years. It’s a significant shift, considering traditional equity funds had their worst showing since April 2024, losing nearly $11 billion in the same month.
But the real story here isn’t just about active ETFs. Investors are nervous. With the uncertainty surrounding the new administration, many are turning to safer bets. Despite the volatility, tax-advantaged assets like ultrashort-bond funds and taxable-bond funds are seeing substantial inflows. It’s clear: people are looking for stability, even in uncertain times.
The nontraditional equity fund category is also catching the eye of many. Funds like covered-call ETFs, which offer equity exposure with built-in risk protection, are attracting billions. In a market where uncertainty reigns, these funds provide a way to hedge against risk while still keeping some skin in the game.
Sources:
https://www.morningstar.com/funds/active-etfs-shine-amid-us-funds-slow-start-2025
https://www.morningstar.com/business/insights/blog/funds/us-fund-flows
https://www.morningstar.com/funds/etf-flows-dont-run-dry-january