Investors ploughed $5.6 billion into ASX exchange-traded funds (ETFs) last month, despite the start of the war in Iran.
Aussies now have $329 billion invested in ETFs, and March was the third-highest month for net inflows ever.
In recent years, ASX investors have used ETFs to gain easy exposure via the local exchange to US stocks amid runaway gains.
US stocks outperformed ASX shares for a third consecutive year in 2025.
The S&P 500 Index (SP: INX) delivered total returns of 17.88% last year vs. 10.32% for S&P/ASX 200 Index (ASX: XJO) shares.
While Aussie investors have been keen on US shares since 2023, ETF provider, Betashares, says the trend is now changing.
Betashares chief economist David Bassanese says investors are pulling out of ETFs exposed to US stocks in favour of local shares.
Bassanese estimates that the split in daily inflows into Betashares' domestic-based and international-based ETFs is now about 50:50.
Data shows on 3 March, the daily inflows into Betashares' global shares-based funds was $52 million vs. $13 million into ASX shares.
On 30 March, about a month into the Iran war, the inflows were $68 million into global shares-based ETFs and $50 million into ASX shares.
Bassanese told The Weekend Australian:
We can see the flows between local and international are lineball now, so this is a big shift.
I think people are hunkering down closer to home.
Due to the size of the American economy, US stocks typically form a large chunk of international shares-based ASX ETFs.
This means an exodus from international ETFs signals less confidence in the US market, in particular.
Image source: Getty Images
Flight to perceived safety
During economic upheaval, it's not uncommon for Aussie investors to focus on the perceived safety of ASX shares.
And we have a little upheaval afoot, right?
A global oil shock with no end in sight, plummeting consumer confidence, resurgent inflation, the likelihood of further interest rate rises in Australia this year, and an upcoming Federal Budget that is expected to raise property taxes and provide limited cost-of-living relief.
The main reason investors switch to ASX shares is their relatively high dividend returns of 3.5% to 4.5% per annum.
Many ASX dividend shares also offer the benefit of 100% franking credits.
This means dividend income is virtually tax-free for those on the personal tax rate of 30 cents in the dollar.
Another appealing element to ASX shares-based ETFs is their exposure to mining stocks amid the new mining boom.
Top 10 ASX ETFs for inflows and outflows last month
Betashares analysed ASX and CBOE data to determine the top 10 ETFs for inflows and outflows last month.
The top ASX ETF for outflows was the largest exchange-traded fund by market capitalisation exposed to US shares.
About $460 million flowed out of the iShares S&P 500 ETF (ASX: IVV) last month, however, $232 million flowed into the iShares S&P 500 AUD Hedged ETF (ASX: IHVV), indicating investors haven't given up on US shares but want some protection from the weaker US dollar.
The top ETF for inflows was Vanguard Australian Shares Index ETF (ASX: VAS), which received about $896 million.
