ETF Flow Highlights for August
- Taxable bond ETFs experienced a record inflow of $43 billion this month.
- US small-cap ETFs finally saw a reversal in trends after several months of outflows.
- The inflow for US stock ETFs was turbulent, ultimately reaching $39 billion by the end of August.
August proved to be an exciting month for exchange-traded fund (ETF) transactions as investors added $118 billion to their portfolios. Compared to July, bond ETFs claimed the majority of the attention, with taxable bond ETFs attracting $43 billion—marking the highest inflow recorded for bond ETFs.
Federal Reserve Chairman Jerome Powell suggested that interest rate cuts may be on the horizon, as inflation levels and labor market conditions start to cool down. Typically, long-term premium bonds benefit from falling interest rates, but persistent inflation worries have driven ETF investors towards the safety of short-term bonds. Interestingly, a substantial portion of the bond ETF flow this month was directed toward Ultrashort Bond Funds, including the Ishares 0-3 Month Treasury Bond ETF (SGOV) and Janus Henderson AAA Clo ETF (JAAA).
Investors Will Return to Small-Cap ETFs Following Rate Cut Announcement
Despite the month’s fluctuations, US stock ETFs secured a solid $39 billion in inflows. The Vanguard S&P 500 ETF (VOO) continued to shine, pulling in nearly $9 billion in August, bringing its total for 2025 to an impressive $81 billion—more than the GDP of several small nations. The iShares Core S&P 500 ETF (IVV) also saw almost $8 billion in new investments.
Small-cap ETFs finally reversed their trend after enduring six months of outflows. Notably, small-cap stocks outperformed their larger counterparts, especially following Powell’s comments at the Jackson Hole Symposium regarding easing fees. This is critical for small firms that rely heavily on external funding, as cheaper capital can be a game-changer. While the outflow trend was negative before Powell’s speech, the announcement seemed to spur renewed investment. The iShares Russell 2000 ETF (IWM) attracted the bulk of the new capital in small-cap ETFs, capturing over half of August’s inflow.
Commodity ETFs also witnessed their highest inflow since March, driven predominantly by gold ETFs like SPDR Gold Shares (GLD) and the iShares Gold Trust (IAU). Gold, typically perceived as a hedge against currency weakness—particularly the US dollar—has reemerged as a favorite. While GLD and IAU stand as the largest gold ETFs as of August 2025, alternatives, like the SPDR Gold MiniShares (GLDM), offer lower fees and could be appealing for many investors despite their lower liquidity.
The technology sector remains a heavyweight in ETF flows, accounting for around 35% of the S&P 500. It seems investors can’t get enough of the allure of new technological advancements, especially with the soaring interest in artificial intelligence. However, as history teaches us, an overreliance on tech might not always end well; reminiscent of the dot-com bubble, many companies thrive while others fall by the wayside.
Investors, Beware of Single-Stock ETFs
The growing popularity of single-stock ETFs has raised some eyebrows recently. With a significant increase of around $14 billion captured in 2025, these ETFs ranked 30th in net worth by August’s end, though they were counted among the top 11 by ETF providers. These funds generate returns primarily by selling call options on their underlying stocks, distributing the revenue to investors. However, the risk increases, particularly when stock performance is stagnant or declining; these ETFs might not be the best choice if you’re counting on robust stock performance.
An illustrative case is Palantir (PLTR), which more than doubled in value this year. Investors who opted for the single-stock ETF strategy would have missed out on 41% of their profits had they stuck with that approach. It’s no wonder the Securities and Exchange Commission has issued warnings to alert investors about potential risks associated with single-stock ETFs, especially as they enter the market.
Money Continues to Drift Across the Pond
International equity flows remained impressive in August, attracting $11 billion. While investment pioneer Jack Bogle may have questioned the merits of international equity, Vanguard continues to capitalize on this trend, boasting three of the top five international stock ETFs by inflow. In fact, the Vanguard FTSE Developed Market ETF garnered $2 billion in August alone. Even though international stocks struggled against their US counterparts over the past decade, they have shown resilience in 2025, surpassing US stocks amid the backdrop of a declining dollar.
Meanwhile, the SPDR S&P 500 ETF (SPY) witnessed significant outflows, yet this doesn’t suggest a loss of long-term investor confidence. Used frequently as a trading tool, SPY’s daily flows resemble the spikes of an EKG machine. For more patient investors, the SPDR Portfolio S&P 500 ETF (SPLG) offers a cheaper alternative with lower fees and potential income from securities lending.
Ethereum ETFs Gain Ground as Bitcoin Struggles
Ethereum has seen a surge in popularity, particularly since July, with the Ethares Ethereum Trust ETF (Etha) surpassing $3 billion in assets by August. Ethereum’s robust performance has continued to attract investors, while Bitcoin’s appeal appears to be faltering. The iShares Bitcoin Trust ETF (IBIT) drew in $700 million this August, a stark contrast to the $5 billion that flowed in during July.
