- Quarterly data shows ETF investors continued to favour large caps, especially in the US and globally, when picking funds
- However, some nuances have emerged
Good returns have been easy to come by for most of this year, with the major regional indices making returns of 5 per cent or more in 2024 so far. But the narrative has once again been dominated by the US and the US tech majors in particular. The S&P 500 was sitting on a sterling total return of more than 12 per cent for 2024 as of mid July, with the tech-heavy Nasdaq Composite even more buoyant, but a recent sell-off for the Magnificent Seven stocks has revived concerns that the tide could be about to change.
Has passive fund buyer behaviour reflected such concerns? The latest reading of quarterly exchange traded fund (ETF) flows suggests that investors were taking a business-as-usual approach in the run-up to the sell-off and loading up on exposure to the biggest companies, both in the US and beyond. Technology and thematic funds have also been selling well, suggesting investors who favour passives are in for a rocky ride if the recent downturn turns into something more protracted. But there are also signs that ETF buyers have been trying to diversify beyond some of the market leaders.