ETF property within the U.S. grew by 28% in 2024 to finish the yr at $10.36 trillion, pushed each by market appreciation and a calendar yr report $1.12 trillion of web inflows. Development-oriented cyclical themes like crypto and the “Magnificent 7” dominated the best-performing ETF classes based mostly on complete returns in 2024.
The Hashdex Bitcoin ETF (DEFI), which may have each spot and futures-based bitcoin publicity, was up 109.4% in 2024. Tech-oriented ETFs just like the Roundhill Magnificent Seven ETF (MAGS) and the Defiance Quantum ETF (QTUM) returned 62.7% and 50.4%, respectively. The World X MSCI Argentina ETF (ARGT) was up 61.6% in 2024, pushed by investor optimism round President Milei’s reform agenda. The VanEck Video Gaming and eSports ETF (ESPO) rounded out the highest 5 classes based mostly on 2024 returns.
Lively ETFs Grew by Taking Market Share from “Good Beta” ETFs
Lively ETFs continued to take a rising share of U.S. ETF inflows, rising to 24.6% in 2024 from 14.6% in 2022. This shift is usually characterised as an energetic vs. passive debate, however the traits are extra nuanced. Lively ETFs largely grew on the expense of “sensible beta” ETFs, with the latter’s share of inflows falling to 7.7% of inflows in 2024 from 18.7% of inflows in 2022 (see Determine 2). In truth, the annual inflows into “sensible beta” ETFs within the U.S. declined by 24% to $86.4 billion in 2024 from $113.1 billion in 2022. That is defined by the truth that among the quickest rising energetic ETFs are from suppliers like Dimensional and Avantis, which use a scientific multi-factor investing method. From an investor’s perspective, these ETFs are an alternative choice to listed, rules-based issue ETFs, and due to this fact compete for a similar funding {dollars}.
In the meantime, the flows into conventional listed ETFs continued to be sturdy with annual inflows rising by 89% to $759.3 billion in 2024 from $402.4 billion in 2022. Desk 1 highlights how well-known, conventional listed ETFs make up 9 of the highest 10 ETFs by inflows within the U.S., with no energetic ETF making the highest 10 record.
U.S. ETF Issuer Leaderboard Evolves as Lively ETF Issuers Develop
The 2 largest issuers, Vanguard and BlackRock, continued to dominate the trade, taking in a mixed share of 53% of ETF inflows within the U.S. Nevertheless, the remainder of the leaderboard is continuous to evolve as energetic ETF issuers take incremental market share. For instance, JPMorgan had a 1.6% share of U.S. ETF web property in the beginning of 2024, however took in 3.9% of inflows through the yr. Equally, Dimensional and Capital Group additionally took in a share of flows that exceeded their market share in the beginning of the yr.
Trying Forward
The earlier yr shall be a troublesome act to comply with by way of the quantity of combination web inflows. Inflows in 2024 exceeded $1 trillion on account of a number of components, together with the success of spot crypto ETFs, a robust U.S. fairness market, and the conversion of mutual funds to ETFs. For reference, the yearly inflows in 2022 and 2023 had been $603 billion and $585 billion, respectively. Trying forward, we count on that the ETF trade within the U.S. can have one other sturdy yr in 2025, however exceeding $1 trillion once more appears unlikely. CFRA tasks that web inflows shall be between $500 billion and $1 trillion in 2025. Nevertheless, if the ETF as a share class of mutual funds construction will get authorised by the U.S. Securities and Trade Fee (SEC) this yr, flows might obtain a further increase.
Aniket Ullal is SVP, ETF Analysis and Analytics for CFRA, one of many world’s largest suppliers of unbiased funding analysis.
