5 min read
Global Fund Flows: 2023 in Review
Weak organic growth driven by the fixed income category.
Key Takeaways
Global open-end and exchange-traded funds had USD 66 billion of estimated net flows, growing 0.17% on an organic basis.
Assets reached USD 44 trillion, USD 5 trillion higher than 2022.
Fixed income was the only category group that had inflows.
Indexed strategies now represent 40% of long-term global assets, or USD 17.9 trillion.
Vanguard enjoys a 37% market share in passive assets, while iShares is a distant second at 15%.
Global open-end and exchange-traded funds experienced a weak recovery in 2023 following outflows of USD 536 billion in 2022. The USD 66 billion of estimated net flows accounted for a 0.17% organic growth rate, the third smallest on record over the past 15 years. Only one category group, fixed income, had inflows. Investors chased higher interested rates and rebalanced surging equity positions, resulting in a USD 395 billion inflow to category funds. The year 2023 may be looked back on as a turning point for fixed-income funds. Passive strategies dominated flows for a second consecutive year, capturing USD 361 billion.
Actively managed ETFs are growing quicker than traditional ETFs. They grew 37%, while passive ETFs grew 8%. Vanguard has the largest market share in passive assets with 37%, while iShares is a distant second at 15%.
Sustainable funds grew 2% organically and assets reached USD 2.9 trillion thanks to surging equity markets. Funds with Morningstar Medalist Ratings of Gold, Silver, or Bronze captured USD 506 billion of inflows in 2023, while neutral and unrated funds had USD 432 billion of outflows. Funds with 3- and 5-star Morningstar Ratings hold 48% of worldwide long-term assets and gathered USD 362 billion in net flows for the year.
Download the report here for the comprehensive overview of global fund flows in 2023.
Fixed Income Dominated Flows; Every Other Category Was in Outflows
Investors shunned equity funds for the first three quarters of 2023 and piled into fixed-income funds in every quarter. Global equities returned 18.12% and global bonds 6.57% in USD terms. Every other asset class had outflows for every quarter of the year. Allocation flows were disastrous; the category’s USD 165 billion in outflows were the worst ever on an absolute and organic basis.
Long-Term Global Assets Reach USD 44 Trillion as Flows Flatten to USD 66 Billion
Long-term funds and ETFs grew 0.17% on an organic basis in 2023 on net flows of USD 66 billion. Only 2008 and 2022 had smaller flows over the past 15 years.
Actively Managed Equity ETFs Continue to Ascend
Actively managed equity ETFs grew 48% on an organic basis in 2023. The category has been gaining momentum since 2020 and shows few signs of slowing down. Category assets stand at USD 342 billion, USD 287 billion of which resides in the U.S. Overall, actively managed ETFs grew 37%, while indexed (passive) ETFs grew 8%, on an organic basis. Ex-U.S. actively managed ETFs grew 28%.
For more comprehensive coverage of global fund flows in 2023, download the full report. Additional topics include:
- Is “Record Money on the Sidelines” a Myth?
- Passive Attains a Majority in the U.S. but Lags Elsewhere
- Passive Fixed Income Is Growing Faster Than Passive Equity
- Dimensional and JPMorgan Dominate Actively Managed Equity ETFs
- Vanguard Reigns in Global Passive Market Share but BlackRock Is Winning the Ex-U.S. Race
- Sustainable Fund Flows Decelerated Again in 2023, But Stayed Positive
- Record Outflows for Liquid Alternatives
This article was adapted from the full report. Download it here.
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