Flow & Tell with iShares | May 2022


ETF traders stayed invested over a turbulent month but showed increasing caution in their allocations. The shape of inflows shifted to include more defensive exposures and more bonds, but not outright stock selling.


A changing makeup of inflows, but many ETFs avoid outflows.

Despite the poor market performance, some investors chose to stay invested and rotate from growth and value and into defensive exposures.

Investors seek refuge from volatility.

Inflows to dividend stocks and Min Vol funds show a preference for traditionally defensive allocations.

Munis muster inflows thanks to tax harvesting.

Investors are locking in capital losses after Muni’s underperformance in 2022.


May ETF heat map

May ETF flows compared with index performance

Scatter plot showing the relationship between index performance and ETF sub-asset class flows for May 2022.

Source: BlackRock, Bloomberg, chart by iShares Investment Strategy. As of June 01, 2022. Flows normalized by AUM as of May 31, 2022.

Index performance is for illustrative purposes only. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results. Index performance is measured by the following indexes: Real Estate: S&P 500 Real Estate GICS Level 1 Index; Consumer Discretionary: S&P 500 Consumer Discretionary GICS Level 1 Index; Consumer Staples: S&P 500 Consumer Staples GICS Level 1 Index; Growth: Russell 3000 Growth Index; Industrials: S&P 500 Industrials GICS Level 1 Index; U.S. Treasury: ICE BofA 10-Year U.S. Treasury Index; HY Credit: iBoxx USD High Yield Index; IG Credit: iBoxx USD Investment Grade Index; Value: Russell 3000 Value Index; Financials: S&P 500 Financials GICS Level 1 Index; Commodities: S&P GSCI Index; Utilities: S&P 500 Utilities GICS Level 1 Index; Energy: S&P 500 Energy GICS Level 1 Index. Coloring is based on quadrants: quadrant I: green; quadrant II: yellow; quadrant III: pink; quadrant IV: purple.


After a dismal start to the year for U.S. equity indices and global markets alike, investors could be forgiven for their bleak outlook on growth and inflation. Central banks across developed markets are faced with a balancing act that pits tempering inflation against maintaining economic growth — with a backdrop of supply chain woes and geopolitical turmoil to complicate matters. As U.S. Federal Reserve Chair Jerome Powell candidly said in a recent interview, it will be “quite challenging to accomplish that [balancing act] right now” and will inevitably “include some pain.”1

However, ETF flows show that investors have been positioning defensively, rather than pulling money out of the market altogether. Year-to-date, equity ETFs gathered nearly $170 billion, continuing the momentum seen throughout 2021.2 Although fixed income ETFs have made up larger percentage of flows than equities over the last two months, wholesale outflows haven’t materialized.

Instead of capitulation, we see rotation. To start the year, investors moved from growth to value ETFs. This has shifted as cyclical sector ETFs saw outflows in favor of defensive sector ETF inflows. Recently, investors have added funds to minimum volatility strategies, while finding opportunities in fixed income. Despite market volatility, investors are finding ways to add defensiveness within their asset allocations while remaining invested.

Changing makeup of ETF flows

Area chart showing asset class ETF flows as a percentage of total ETF flows from February 2020 to May 2022.

Source: BlackRock, Bloomberg, chart by iShares Investment Strategy. As of June 01, 2022. ETF groupings determined by BlackRock.


Given the shaky market environment and gloomy forward expectations, investors are wondering where they can hide. We favor adding a defensive tilt to build portfolio resilience while remaining invested. Investors have looked to agree, with flows in May into key defensive categories. Dividend stocks are one example, as steady earnings and high levels of cash on hand are often required. Year-to-date, amidst tightening financial conditions, U.S. Dividend ETFs have seen over $6bn of inflows3. Over this period, dividend stocks have outperformed the broader U.S. stock market by over 20.38%4. To read more about how dividend stocks can be additive to a portfolio, see our iShare.com Insights Hub.

While dividend stocks can help increase the resilience of a portfolio, Minimum Volatility (Min Vol) strategies aim to offer a more full-fledged risk reduction. Given the uncertain path of both interest rates and growth, investors have been turning to Min Vol ETFs to position against deep drawdowns in major indexes. Minimum volatility stocks are those that have lower volatility characteristics relative to the broader U.S. equity market. With the S&P 500 down 12.76% since the beginning of the year5, Min Vol ETFs have gathered $153m of net inflows year-to-date and $623m of inflows in May6. Min Vol ETFs tend to have overweights to less cyclically sensitive sectors like software, pharmaceuticals, and biotechnology, making Min Vol not only a choice for added potential portfolio resiliency during market selloffs, but also an alternative way to add a defensive tilt.

Flows into Dividend ETFs accelerate, while Min Vol flows turn positive

Bar chart showing monthly ETF flows into low volatility ETFs and dividend ETFs from May 2018 to May 2022.

Source: BlackRock, Bloomberg, chart by iShares Investment Strategy. As of May 31, 2022. ETF groupings determined by BlackRock, Markit.


Counterintuitively, flows to Municipal Bond ETFs in May were most likely due to poor performance in the asset class. Outside of the short-lived sell-off in bond markets due to initial Covid-19 closures, iShares National Muni Bond ETF (MUB) is now down to its lowest levels since 2014 after declining by 6.62% in price this year7. This performance had many institutional and retail investors alike looking to book losses against realized capital gains, which they could do by selling individual Muni bonds, Muni focused mutual funds or other Muni ETFs. The proceeds of those sales are often deployed into a similar exposures, of which ETFs have historically been a large recipient. In our facilitation of trades with clients, we saw MUB as a notable recipient of that tax-loss harvesting, as it’s known, adding $3.8bn in May, it’s largest month of inflows since inception8.

Municipal Bond ETFs see record monthly inflows

Bar chart showing monthly flow into Municipal Bond ETFs since January 2010.

Source: BlackRock, Bloomberg, chart by iShares Investment Strategy. As of May 31, 2022. ETF groupings determined by Markit.

Performance data represents past performance and does not guarantee future results. Investment return and principal value will fluctuate with market conditions and may be lower or higher when you sell your shares. Current performance may differ from the performance shown. For most recent month-end performance and standardized performance, click here.




Gargi Pal Chaudhuri

Gargi Pal Chaudhuri

Head of iShares Investment Strategy Americas at BlackRock

Kristy Akullian

Investment Strategist


Jon Angel

Investment Strategy


Nick Morales

Investment Strategist