BlackRock Model Portfolio Changes Drive ETF Flows in May

May ETF Flows Highlights

• Investors piled $90 billion into exchange-traded funds in May
• BlackRock model portfolios’ adjustments rearranged their ETF assets
• International equity ETFs had their highest monthly inflows since 2023, outpacing US stock flows
• Vanguard S&P 500 ETF VOO is on track for a record-breaking year
• iShares Bitcoin Trust ETF IBIT, a spot bitcoin ETF, gained $6.6 billion

ETF flows bounced back after a slower April, compared with the first three months of 2025. Investors turned their attention away from US equities toward taxable bond and international stock ETFs. BlackRock shifted its Target Allocation ETF Models, and its ETFs saw substantial inflows and outflows.

BlackRock Adjusts ETF Model Portfolios

BlackRock adjusted its models in May based on its market outlook. Its model portfolios consist of iShares ETFs, and the adjustments aimed to offer short-term inflation protection and increase global diversification. IShares Core S&P 500 ETF IVV saw the most outflows of any ETF, as BlackRock trimmed its US stock position in favor of increased international stock ETFs. BlackRock increased exposure to Chinese stocks through iShares Core MSCI Emerging Markets ETF IEMG and added more international value stocks via iShares MSCI EAFE Value ETF EFV.

The models also added iShares US Thematic Rotation Active ETF THRO to the mix. Consequently, it saw massive inflows relative to its total assets. The ETF recorded monthly flows of $3.7 billion in May, or more than 6 times the fund’s size at month-end April 2025. THRO attempts to outperform the market by capitalizing on opportunities with long-term payoffs while taking advantage of macro-trends and avoiding market shocks. The strategy relies on large language models and natural language processing, according to the ETF’s fact sheet.

BlackRock made similar adjustments to its fixed-income portfolios. It trimmed its US bond ETFs for iShares Core International Aggregate Bond ETF IAGG. Within its US bond sleeve, BlackRock reduced holdings in high-yield, convertible, and core bonds in favor of short-term Treasury Inflation-Protected Securities and long Treasury bond ETFs. iShares Core Total USD Bond Market ETF IUSB gave way to iShares 0-5 Year TIPS Bond ETF STIP and iShares 10-20 Year Treasury Bond ETF TLH.

IShares saw the most inflows of any ETF provider in May, although the model adjustments themselves didn’t result in meaningful net inflows. The table below shows the net flows of the largest ETF providers by net assets.

May ETF Performance Snapshot

The table below shows May returns for a sample of Morningstar analyst-rated ETFs that represent major sections of the stock and bond markets.

International ETFs Outperform as US Dollar Declines

International stock ETF flows outpaced US stock flows in May, the first time since January 2023. US stock ETF flows are typically several times larger than international stock flows.

International stock ETFs have stood out this year. The Morningstar Global Markets ex-US Index, which excludes US stocks, outperformed the Morningstar US Market Index by nearly 13 percentage points for the year to date.

International ETFs’ strong performance is partly attributable to the positive return from foreign exchange rates. The relative strength of the dollar declined for the year to date, according to FRED’s Real Broad Dollar Index. Exchange rates are a secondary source of return for unhedged international ETFs. Exposure to foreign currencies has benefited investors as the dollar has weakened. That was a headwind for currency-hedged ETFs. They didn’t perform as well on account of their reduced foreign currency exposure, but they still outperformed US stock ETFs on average.

Hedged ETFs offer protection against currency movements, but that protection can be costly, and it increases international ETFs’ correlation with US ETFs. Currency-hedged ETFs can reduce volatility, but the benefits are cyclical, and their added costs can cut into returns. Most hedged ETFs use forward contracts for their hedging, which can expose them to capital gains distributions.

Investors seeking greater diversification may prefer unhedged ETFs. International bond ETFs often hedge away currency risk, such as IAGG, since the volatility from foreign-exchange rates often overwhelms the modest volatility of the underlying bonds.

Vanguard’s S&P 500 Tracker VOO on Pace for Record Inflows

If VOO had no more flows for the rest of the year, its year-to-date flows would rank it as the third largest annual inflow for an ETF, ever. First and second would go to VOO and IVV in 2024, respectively. VOO has seen the most inflows in three out of the five months this year so far, and in the other two months it landed in second place. It’s already surpassed its annual flows from 2022 and 2023 in just five months. Investors haven’t stopped flocking to this low-cost S&P 500 tracker.

IShares Bitcoin Trust ETF IBIT Continues to Attract Inflows

IBIT took third place in net inflows this month and came in fifth for year-to-date flows. A spot bitcoin ETF, it has direct exposure to bitcoin and has garnered significant assets since its 2024 launch. In May 2025, $6.6 billion flowed into the ETF, marking a record month for it. BlackRock CEO Larry Fink was initially outspoken in his distaste for the asset. He has since changed his tune. IBIT is now its eighth largest ETF with nearly $70 billion in assets, as of May 2025. Regardless of your opinion on cryptocurrency, BlackRock is certainly capitalizing on the demand for it.