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ETFs are coming off a year of record growth, with inflows totaling more than $1 trillion for the first time.
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The funds have remained popular as investors continue to trade mutual funds for the tax efficiency and ease of trading of ETFs.
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ETF experts expect massive growth to continue, particularly within actively managed funds.
Exchange-traded funds just had a record year as investors continue to trade mutual funds for better tax efficiency and ease of exchange of ETFs.
Annual inflows into U.S.-based ETFs totaled more than $1 trillion for the first time in 2024, overwhelmingly beating previous records to bring the total market to $10.4 trillion as measured by total assets managed.
Funds tracking the S&P 500 Index once again saw the biggest inflows, helped by a strong preference for U.S. stocks as the market enters the third year of its uptrend, closing out 2024 with a gain of 23% for the benchmark index.
US stocks and the ETFs that track them benefited from new momentum Donald TrumpThe country’s victory in November’s presidential election as investors priced in corporate tax cuts and a looser regulatory environment. ETF flows hit a monthly record of $164 billion in November, data from ETFGIan ETF research and advisory company.
Besides popular index funds, 2024 also saw the creation of the first spot Bitcoin ETF and a boom in leveraged funds aimed at risk-taking investors looking to amplify gains on single stocks.
Now investors and ETF managers are hoping the party continues into 2025, and they are largely turning to actively managed funds rather than traditional fixed-income or index ETFs, sources said.
Active funds grew in popularity last year, bringing in $276 billion through November, according to ETFGI data. This represents almost a third of all flows for the year and represents an increase of 71% compared to 2023.
Active funds have also dominated new issuance as regulations around ETFs have eased in recent years, accounting for about 80% of all new ETF launches last year, said Jon Maier, chief ETF strategist. at JPMorgan.
The trend will likely continue into 2025, especially as market breadth continues to expand and more stocks participate in the market rally, he says.
“There are a lot of active leading suppliers coming into this sector. The market has been dominated by big names like Mag Seven, who have really driven performance, and you are seeing the breadth of the market broadening. This offers further opportunities opportunities, particularly in the active space,” he said.
Maier says that among the enormous opportunities offered by active funds in the coming year, he sees particularly promising potential in fixed income.
