The exchange-traded fund industry hit an all-time high with global assets surging to $18.8 trillion under management at the end of September. This achievement comes after 76 months of consecutive net inflows—a six-year streak that has brought record levels of investment into ETFs this year, according to ETF-focused research firm ETFGI.
At the end of September, the global ETF industry had 15,125 ETFs and other exchange-traded products (ETPs), with 29,677 listings, and assets of $18.81 trillion, a year-to-date increase of 26.7% over the total for 2024. These ETFs come from 915 providers on 81 exchanges in 63 countries, as stated in ETFGI’s Global Trends in the ETFs Industry report released November in New York at the 6th Annual ETFGI Global ETFs Insights Summit.
The compound annual growth rate for global ETFs/ETPs over the past 10 years was 20.1%, said the report.
The U.S. ETF industry had 4,554 ETFs/ETPs from 428 providers on 3 exchanges. Year-to-date assets grew 22.7% over last year to $12.70 trillion. The compound annual growth rate for U.S. ETFs/ ETPs over the past 10 years was 19.6%.
Unprecedented wave of new products
“The numbers tell a compelling story of record assets and net inflows, driven by an unprecedented wave of new product launches,” said Deborah Fuhr, managing partner and founder of ETFGI. She added, unless something catastrophic happens that affects the entire market, this trend is expected to continue. A significant change is the increased use of ETFs across all investor types: retail investors, institutions, and across geographies.
Institutions in Europe and the United Kingdom are leading the charge, with retail investors embracing ETFs in growing numbers. Regulators in the U.K. and Europe are actively encouraging retail investors to move away from traditional bank accounts toward investing, said Fuhr.
“In terms of product innovation, ETFs that use option-based strategies and single-stock ETFs, along with private credit, private equity, and newer types of exposure, are all gaining traction,” said Fuhr.
Powerful Tailwinds for ETFs
In the US, multiple factors are creating powerful tailwinds for ETFs. These tailwinds include the rise of model portfolios and fintech apps used by retail and financial advisors, combined with the massive generational wealth transfer currently underway— $124 trillion that will be passed down to younger generations. Millennials and members of Gen Z are increasingly self-directed and ETF-focused.
Female investors have also become an increasingly important cohort targeted by online brokers because they live and invest longer.
Retired investors often take money out of their 401k accounts, which traditionally hold mutual funds, and consider using ETFs.
Another component of the mutual fund-to-ETF trend is more investors are moving to active investment structures and structure-type products, as Bitcoin ETFs go mainstream.
Also, mutual fund companies are converting their own funds into ETFs, causing people to look at and potentially embrace ETF share-class models.
This led to September posting record net inflows of $152.50 billion, for record year-to-date net inflows of $951.27 billion. That’s 28% greater than the first nine months of 2024.
Global Reach and Market Dynamics
The US remains the dominant market, holding 68% of all global ETF assets. Europe is second with 16%, while Asia accounts for 8%.
Equity products continue to dominate, receiving the majority of flows, $61.59 billion in September.
Active ETFs, which include both equity and bond strategies, receive the second most, followed by fixed income index.
Equity exposure overall represents 71% of U.S. market, while active ETFs make up 10.6% of all assets.
The industry still tends to be concentrated. Only 1,149 hold more than $2 billion, but they account for 85% of all global assets in ETFs.
There is a clear preference among people to focus on fees. ETFs with an annual cost of less than 10 basis points account for $8.2 trillion. Only a small number of funds, 1,565, fall into that bucket, but they represents substantial assets.
The top 20 ETFs account for 27.8% of global ETF assets. The largest ETF, Vanguard S&P 500 ETF (VOO), accounts for 4.1% of all assets with $764.0 billion.
Of the top 20 ETFs that track indices, 17 provide exposure to equity, with two following fixed income indices, and one commodity ETF.
Remarkable Growth Outlook for Next 5 Years
The story continues with active strategies gaining ground, signaling that the ETF revolution is far from over.
If you take the current level of assets from a few months ago and look at different growth rates, the future looks extraordinary. Assets in ETFs globally represent 20% of the market. By 2030, global ETF assets under management are projected to reach between $27 – 52 trillion, and active ETFs could grow to $4 trillion.