ETF Snapshot: Summer break 2025 – it’s been a hot one!
Key takeaways
A total of US$62.3 bn of NNA was gathered in the two-month period, bringing the year-to-date NNA to US$226.5bn, with 74% going into equities.
US beta exposures led equity inflows in August, overtaking Global Equities, which continued to see steady demand from long-term savers.
The USD has shifted from a return driver and diversifier to a risk in 2025, explore our latest ideas on how to position for this potential change.
Recapping flows in July and August
Welcome back after the summer, a season that saw markets breaking records. In the US, both the S&P 500 and the tech-heavy Nasdaq-100 hit new all-time highs in August. Interestingly, perceived havens like Bitcoin also surged, with gold following suit shortly after month-end.
Gold’s appeal has been fuelled in part by rising tensions between the US administration and the Fed, which heated up over the summer. With signs of softening in the US labour market, we now expect the Fed’s first rate cut of 2025 to come at its September meeting. The US Dollar firmed from its three-year low in July, but we believe the greenback could further weakness ahead.
Turning to Europe, ETF flows in July and August saw inflows of US$30.8bn and US$31.6bn, respectively; the strongest two-month run since February. A total of US$62.3bn of net new assets was gathered, with 74% directed into equities. US beta exposures led equity inflows in August, overtaking Global Equities, which remained consistently strong in both months, partly thanks to their popularity among long-term monthly savers.
Emerging Market Equities and Thematics also gained traction, with Defense and AI among the standout themes. Outside equities, flows into fixed income and commodities, especially precious metals, accelerated in August.
Cash Management continued to dominate fixed income flows, but demand for Investment Grade credit and High Yield picked up. Government bonds remained largely out of favour, though still saw positive flows, suggesting investors are leaning toward credit risk over duration.
Has the US Dollar moved from being a diversifier to a risk driver in 2025?
The US dollar seems to no longer be the haven of choice. The US administration’s actions are undermining confidence in US institutions and making the US less attractive to foreign capital. The USD has weakened this year but likely could weaken further in the coming years.
For portfolios retaining a large cash allocation, it’s worth making it work harder
Cash management ETFs have seen strong inflows in 2025 as investors look to be keeping some of their powder dry. We believe that investors who are maintaining outsized cash allocations in their portfolios may want to consider putting some of it to work.
Diversify away from the US dollar with alternative assets
With the USD no longer the haven of choice, investors and central banks may wish to look for other, perhaps non-fiat assets to diversify their portfolios. Consider gold, silver and even cryptocurrencies are increasingly being considered as alternative sources of diversification.
USD weakness could make currency-hedged ETFs worth considering for US equities
The S&P 500 recently hit 10% returns year-to-date, however, a EUR-based investor would still be in the red though 2025 on an S&P 500 investment. Hedging does come with a cost but in times such as these, when we believe US assets are facing currency headwinds, it can help investors preserve their capital.
