ETF Investors Put Safety First in March

Key Takeaways

• The Morningstar Global 60/40 Index shed 2.0% in March 2025 as tariff-fueled economic concerns rattled US stocks.
• US exchange-traded funds still pulled in $91 billion in March and $297 billion in the first quarter.
• Ultrashort-bond ETFs punctuated a record quarter with $14 billion of March inflows.
• Red-hot gold ETFs helped the commodities-focused Morningstar Category notch its best monthly flows since August 2020.
• Providers focused on active ETFs and trading tools made some of the largest strides in quarter one.

The table below shows March returns for a sample of Morningstar-analyst-rated ETFs that represent major sections of the stock and bond markets. The global blended portfolio declined 2.4% in the month. Vanguard Total World Stock ETF VT shed 3.5% in its worst month since April 2024, and the bond sleeve provided no relief as Vanguard Total International Bond ETF BNDX slid 1.2%. The blended portfolio emerged from the turbulent first quarter 5 basis points lower than where it started.

March Market Performance Through the Lens of Analyst-Rated ETFs

First-Quarter ETF Flows Pile Up Despite Market Volatility

Investors poured roughly $91 billion into US ETFs in March, bringing their total first-quarter inflows to $297 billion. ETFs are on pace to clear the record $1.1 trillion they collected in 2024, especially since inflows tend to accelerate toward the end of the year. Active ETFs secured about 40% of the first-quarter flows despite constituting 9% of the ETF market entering 2025.

March Flows Across Morningstar US Category Groups

Bond ETF Performance: Short-Term Portfolios Weather Uncertainty Best

US bonds didn’t breathe life into the blended portfolio, but they didn’t kill it, either. Vanguard Total Bond Market ETF BND was practically flat in March. A slew of economic concerns weighed on Treasuries early in the month, but widespread demand for their safety helped bonds finish the month on a high note.

Tariffs dominated headlines last month. Earlier this year, the bond market had a hard time modeling when and to what extent tariffs would roll out. The picture crystallized in March, sparking fresh concerns about a recession and stagflation, which is the combination of inflation and stagnating economic growth. Inflation data released in mid-March actually came in milder than expected, and the Federal Reserve held interest rates steady at its meeting the following week. Many investors expect tariffs to stoke inflation and slow growth down the road, however, explaining why short-term bonds fared best in March. Vanguard Short-Term Bond ETF BSV advanced 0.51%; its long-term counterpart Vanguard Long-Term Bond ETF BLV shed 1.25%. Vanguard Total Bond Market ETF and most other broad-based bond portfolios finished in between—normally closer to the high end.

The same tariff concerns interrupted a nice first quarter for high-yield corporate credit. SPDR Bloomberg High Yield Bond ETF JNK lost 1.2% in March after climbing 2.0% over the two months prior. Credit spreads expanded more in March than any month since June 2022, according to ICE Data Indices. Credit spreads widen when investors demand a higher return for lending to a corporation rather than the US government—a sign of an increasingly risky investing environment.

US bonds’ challenges paled in comparison to those of international bonds. Vanguard Total International Bond ETF BNDX slid 1.8% in the first week of March before clawing back some ground to finish the month with a negative 1.2% return. Early in March, Germany’s incoming chancellor announced reforms to the nation’s borrowing limit, the debt brake, that previously kept a tight lid on its finances. That news sparked a selloff in German sovereign bonds that quickly spread through the eurozone and beyond. While that announcement was painful for foreign-bond investors, the same news lifted stocks and the euro, perhaps compensating them elsewhere.

Ultrashort Portfolios Drive Bond ETF Flows

Taxable-bond funds hauled in $24 billion in March, a tick below their January and February collections but still a solid sum. This group reeled in nearly $100 billion in the first quarter, equal to about 6% of its assets entering 2025. The market backdrop seemed to steer investors toward safer fixed-income investments.

Morningstar Categories With the Largest March In- and Outflows

Ultrashort bonds punctuated a record quarter with $14 billion of March inflows. The ultrashort-bond category absorbed more than $40 billion in quarter one, shattering its previous $23 billion record. Cheap cash substitutes led the charge: iShares 0-3 Month Treasury Bond ETF SGOV gathered almost $10 billion over the past three months, and fellow safe havens SPDR Bloomberg 1-3 Month T-Bill ETF BIL and WisdomTree Floating Rate Treasury ETF USFR thrived as well.

Active ETFs that target more yield powered the ultrashort space to new heights. Collateralized loan obligation ETFs flourished, though Janus Henderson AAA CLO ETF JAAA, the largest of the bunch, shed about $600 million in March after collecting $15 billion over the prior 12 months. Time will tell whether CLO ETFs’ momentum has stalled or if March was a blip on the radar.

ETFs With the Largest March In- and Outflows

Remove ultrashort bonds from the equation, and March was a quiet month for the taxable-bond cohort. Long-government bond ETFs gathered $3.5 billion, but their intermediate counterparts shed $4.6 billion. Symmetrical flows between iShares ETFs in those categories suggest that model portfolio changes may explain those results. Active-heavy categories intermediate core-plus bond and multisector bond collected about $1.7 billion apiece in March. On the other hand, bank-loan ETFs shed $3.6 billion—their worst month on record and a sharp U-turn after months of solid inflows. The two largest players bore the brunt of it. Invesco Senior Loan ETF BKLN

bled $1.8 billion, and SPDR Blackstone Senior Loan ETF SRLN surrendered $1.5 billion. Expanding private credit—newly available in ETFs—may be threatening bank-loan products, but their outflows would probably be more gradual if that were the case.

Commodities and Digital Assets: Gold ETFs Rise While Bitcoin ETFs Fall

Gold ETFs are on a roll. The commodities-focused category, which mostly comprises gold, inhaled $7.4 billion last month and $11.0 billion in the first quarter. The category tallied more inflows in March than any month since August 2020, when fresh wounds from the pandemic-fueled drawdown pulled investors toward the safety of precious metals. Similar market worries have sparked gold ETF flows lately. And they have generated tremendous returns to boot: SPDR Gold Shares GLD soared 19.2% in the first quarter and 40.1% over the 12 months through March.

Digital-assets funds are trending in the other direction. The category that houses bitcoin ETFs shed $1.5 billion in March, marking two straight months of outflows after nine consecutive months of inflows. Performance is a factor. Bitcoin tumbled 17.4% in February and slid another 2.3% in March. Bitcoin’s recent woes have coincided with those of stock indexes, potentially eroding investors’ belief that it belongs in portfolios for diversification. Fidelity Wise Origin Bitcoin ETF FBTC, which bled nearly $300 million in March, posted a 0.78 correlation with the Morningstar US Market Index over the past six months. Its returns coincided even more closely with growth-stock indexes. That’s no problem when all those investments soar—read: 2024—but it matters when the tide goes out.

Asset Managers: Providers of Active ETFs and Trading Tools Punch Above Their Weight

The ETF provider flows leaderboard featured few March surprises. IShares and Vanguard, the two heftiest ETF providers, finished 1-2 in the standings.

March Flows for the Largest ETF Providers

The exhibit below shows ETF providers that leveled up in quarter one. It ranks the top 40 ETF providers by end-of-2024 assets and by first-quarter net flows. The table shows each firm whose flows ranking exceeded its starting size rank by five or more spots.

Several firms’ historical focus on actively managed mutual funds has recently trained on active ETFs. The first five names, plus T. Rowe Price and Morgan Stanley, fit that description. Not every mutual fund provider has converted brand and reputation into ETF success, but these firms have made inroads.

The rest of the quarter-one climbers either scored with one standout ETF or a series of single-stock products. Victory benefited from VictoryShares Free Cash Flow ETF’s VFLO $1.8-billion first quarter. KraneShares CSI China Internet ETF KWEB brought in nearly the same amount for its parent company. Meanwhile, GraniteShares and YieldMax capitalized on the demand for single-stock ETFs, rolling out suites of products that offer leveraged exposure to or write calls on individual companies.

ETF Providers That Punched Above Their Weight in Q1