ETF Prime: International Stocks Lead Flows

Core Insights - International equities have seen record inflows, with over $220 billion in net inflows in 2025 and approximately $75 billion year-to-date in 2026 [1] Group 1: International Equity Flows - The iShares Core MSCI Emerging Markets ETF (IEMG) ranks second in inflows with about $10 billion year-to-date [1] - The Vanguard Total International Stock ETF (VXUS) attracted roughly $9 billion, while the Vanguard FTSE Developed Markets ETF (VEA) saw about $3 billion in inflows [1] - Performance has been a key driver, with IEMG up 48% and the iShares MSCI EAFE ETF (EFA) gaining 44% since the beginning of 2025, significantly outpacing the S&P 500's 18% gain [1] - A weaker U.S. dollar, down approximately 10% since early 2025, and attractive valuations are contributing factors, as international equities trade at about 18 times forward earnings compared to 22 times in the U.S. [1] Group 2: Active ETF Trends - Active ETFs represent only 11% of total industry assets at $1.5 trillion but captured 36% of all flows in 2025 [1] - Financial advisors are driving the adoption of active ETFs, with 47% of their ETF flows directed towards active strategies [1] - Of the over 1,000 ETFs launched in 2025, 889 were active strategies, with advisors favoring those with expense ratios between 20 and 40 basis points, which captured 46% of flows [1] - Only 14% of advisor flows went to ETFs costing 60-plus basis points, compared to 20% in the broader retail market, indicating a greater fee-consciousness among advisors [1] - Small caps and options-based income strategies are identified as growth categories for 2026, with the Russell 2000 projected to have an earnings growth estimate of 41% [1]