ETF Prime: International Stocks Lead Flows

Roxanna Islam, head of sector and industry research at VettaFi, joined Nate Geraci on this week’s ETF Prime to discuss record international equity flows. The category saw net inflows of over $220 billion in 2025 with momentum continuing into 2026 at roughly $75 billion year-to-date.

The iShares Core MSCI Emerging Markets ETF (IEMG) ranks second on the ETF inflow leaderboard with about $10 billion year-to-date, according to Islam. The Vanguard Total International Stock ETF (VXUS) pulled in roughly $9 billion while the Vanguard FTSE Developed Markets ETF (VEA) attracted about $3 billion.

Performance has driven the inflows. IEMG is up 48% since the beginning of 2025 while the iShares MSCI EAFE ETF (EFA) gained 44% over the same period, outpacing the S&P 500’s 18% gain. A weaker U.S. dollar down roughly 10% since early 2025 and attractive valuations are primary drivers, Islam said. International equities trade at approximately 18 times forward earnings compared to 22 times in the U.S.

Advisors Drive Active Adoption

Shifting to another major trend, Craig Ebeling, head of ETF strategist at Fidelity Investments, discussed active ETF trends. While active ETFs represent only 11% of total industry assets at $1.5 trillion, they captured 36% of all flows in 2025, according to Ebeling. Financial advisors drove faster adoption with 47% of their ETF flows going to active strategies.

Of the 1,000-plus ETFs launched in 2025, 889 were active strategies. Advisors primarily use active ETFs with expense ratios between 20 and 40 basis points, which captured 46% of flows. Only 14% of advisor flows went to ETFs costing 60-plus basis points compared to 20% in the broader retail market, suggesting advisors are more fee-conscious.

Ebeling also highlighted small caps and options-based income strategies as growth categories for 2026, noting the Russell 2000 has a projected earnings growth estimate of 41%.

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