ETF Market Sees Heavy Hedge Fund Activity and Rising Demand for Safe-Haven Assets

Hedge Fund Positioning Shakes Equity ETF Performance

The ETF landscape is seeing intensified volatility in April 2025, largely due to aggressive repositioning by hedge funds. According to JPMorgan, momentum-driven players—especially Commodity Trading Advisors (CTAs)—have dumped approximately $750 billion in equities this year, sharply reducing their exposure to major indexes like the S&P 500 and Nasdaq 100. These funds have transitioned from long to short positions, significantly increasing short interest in ETFs such as SPDR S&P 500 ETF (SPY) and various small-cap equity ETFs.

This selloff has stirred debate, as foreign investor sentiment remains supportive. Contrary to assumptions that international investors are pulling back, February data showed continued net inflows into U.S. stocks and bonds. Retail investors have also remained steady, contributing about $50 billion per month into U.S. stock ETFs. The divergence between institutional and retail flows highlights a complex market dynamic, with hedge funds creating short-term price pressure despite broad interest from other investor segments.
More at MarketWatch

Bond ETFs and Safe-Haven Assets Dominate Inflows

Fixed income ETFs are enjoying a renaissance, drawing in $120 billion in capital so far in 2025. These ETFs now account for nearly 20% of the U.S. investment-grade corporate bond market—a dramatic increase from just 5% in 2013. Month-end trading volumes have surged to 82% above average, a shift attributed to predictable rebalancing patterns by passive index funds. This liquidity boost is also enticing active managers to concentrate trades during those periods.

However, some analysts warn this could lead to weaker liquidity during off-peak trading days, increasing the risk of volatility when ETF demand does not align with bond market supply. Still, for now, the expansion of bond ETFs is viewed as a net positive, enhancing transparency and flexibility in fixed income investing.
Read more at FT

Meanwhile, rising economic uncertainty and recent tariff announcements have pushed investors into traditionally defensive assets. SPDR Gold Shares ETF has surpassed $100 billion in assets under management as gold prices hit a historic high of over $3,300 per ounce. Simultaneously, spot Bitcoin ETFs saw nearly $1 billion in daily inflows, helping push Bitcoin’s price close to $94,000. These flows into gold and cryptocurrency ETFs reflect investor anxiety about inflation, currency stability, and political unpredictability.
More from Business Insider

As April closes, ETF markets are caught between risk-off positioning from hedge funds and a surge in safe-haven demand. The coming weeks may reveal whether institutional caution or retail resilience ultimately defines ETF market momentum.