Fixed income ETFs set record pace in February with $42B inflows

Exchange-traded funds attracted $111 billion in net inflows in February, putting ETFs on pace for an unprecedented $1.5 trillion haul in 2025, according to a report from State Street Global Advisors. The month was marked by record flows into fixed-income ETFs, a shift in sector sentiment, and a resurgence in thematic investing.

Fixed-income ETFs saw their largest monthly inflows on record, taking in $42 billion. The increase was driven by strong demand for active bond strategies, which received $17.7 billion in net flows. The report suggested that active fixed-income ETFs could bring in more than $200 billion this year, nearly doubling the prior record set in 2024.

"Given the potential for stagflation concerns following the Atlanta Fed GDPNow report, tariff announcements, and consumer inflation expectations hitting a 30-year high, interest in inflation-sensitive real assets like commodities, gold, and inflation-linked bonds has increased recently," noted the report authored by Matthew Bartolini, SSGA's head of Americas ETF Research.

Despite strong overall flows, sector-based ETFs experienced significant outflows, with technology funds leading the decline. In total, eight sectors saw outflows amounting to $1.6 billion. Financials were one of the few bright spots, attracting $340 million in February and continuing a three-month trend of positive flows.

Investors also showed increased interest in active ETFs, which pulled in a record $44 billion in February – representing 40 percent of all flows. Active equity ETFs accounted for $22.5 billion of that total, a marginal majority, while active fixed-income strategies continued to grow in popularity.

"The record active flows are underpinned by supportive depth, as more than 70% of active funds had inflows in February," the report said.

Meanwhile, thematic ETFs, which had experienced net outflows in recent years, recorded their largest two-month inflow total since 2021. The category brought in $480 million in February after adding $2 billion in January. Thematic strategies focused on artificial intelligence, security, and advanced connectivity saw particularly strong inflows.