NovaDius’s Wealth Management president Nate Geraci and Renaissance Capital senior strategist Matt Kennedy sat down with Leslie Picker to discuss the record inflows of ETFs in July and why 2025 is slated to be another banner year for the industry.

Wall Street

Exchange-traded funds (ETFs) are experiencing substantial inflows, with over $700 billion invested so far this year, including a record $120 billion in July alone. Projections indicate total inflows could reach between $1.2 and $1.3 trillion, surpassing last year's record of $1.1 trillion. Equity ETFs have attracted about $360 billion, while fixed income ETFs have seen $230 billion, with the remainder distributed among categories such as crypto and buffer ETFs.

The increasing popularity of ETFs is attributed to their versatility, allowing investors to express various market views, including active management, crypto, and hedge fund strategies. Additionally, the surge in AI-related investments is influencing both private and public markets, with many companies integrating AI into their operations ahead of potential IPOs. This trend is expected to continue shaping fund flows and market dynamics.

Why 2025 is on pace to be another record year for ETF inflows

Let's continue the conversation on fund flows, Nate. ETFs still on pace for yet another record year following a big July of inflows? Yeah, so over $700 billion has flowed into ETFs overall this year, including around 120 billion in July, which was the highest monthly total this year. And so right now we're on pace for somewhere in the neighborhood of, say 1.2 to $1.3 trillion in inflows, which would break last year's record of 1.1 trillion. And it's worth mentioning that historically, if you look, the fourth quarter of the year is the strongest for ETF inflows. And so it's certainly possible we could see some acceleration from here. And if you drill down just a little bit further, about 360 billion has gone into equity ETFs. There's been another 230 billion into fixed income ETFs. And then the remainder spread across things like crypto ETFs, buffer ETFs, et cetera. There are a lot of categories benefiting. And I just think we're at the point now where if investors want to express a particular view on the financial markets, any view that they might have, they can now do it using ETFs, right? If they want active management, ETFs have it. If they want crypto, they can access that through ETFs. Hedge fund strategies, option strategies, it's all available in an ETF wrapper now. And so I think, you know, it's been a pretty good year in the markets. We've had the bounce since the April low, but I think regardless of what the broader markets are doing, there's now a place for ETF investors to go to express their views. So yeah, it's been a great year so far. Yeah, express their views long or short. They want to use it as hedging option or to kind of express a certain factor or a segment of the market, to your point. Matt, where are you seeing the money flow in the pre-IPO phase for private companies? In other words, what's the next big innovation bet that could impact the markets more broadly in the longterm? I mean, the obvious answer is AI. I think a company just has to, you know, bring out its hat and then get a billion dollars in that space, it's just crazy. So we do see that leading. I mean, it's a good thing in the long run. It'll lead to IPOs maybe by the end of the decade, 2028, 2029, we might get an open AI IPO. But it is more than just those big names. I think we're seeing a lot of companies that are going public that people don't even realize are AI companies. Heartflow last week, for example. So, and not just these LLMs, but there's companies that are integrating AI into all of their solution throughout the tech stack. Figma, another perfect example of that. So, you know, a lot of fun flows going into AI. And I think we'll eventually, and are currently seeing the IPO results of that. Yeah, I was told that kind of one of the reasons that we had such a big pipeline buildup was there are a whole slew of companies that needed to get their AI story straight before even going public. Companies who wouldn't think about, you know, from an AI context, but when they're gonna be on the roadshow, they were gonna be asked about it by investors. And so they had to get their story straight for what they're gonna say. Are you using AI? Are you gonna be disintermediated by AI? So that's a key component of pretty much any company looking to IPO right now as well. My many thanks to Matt and Nate for joining us today. Great stuff. Remember, you can catch all of our other content at etfedge.cnbc.com. Thank you very much for watching.

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