The year 2024 marked an unprecedented milestone for the exchange-traded fund (ETF) market, with global assets under management (AUM) reaching a staggering $15 trillion. This remarkable growth was driven by record-breaking net inflows surpassing $1.6 trillion, solidifying ETFs as a preferred investment vehicle among investors worldwide.
By the end of 2024, the total number of ETFs crossed the 12,000 mark, with more than 1,000 new ETF launches during the year. Passive ETFs continued to dominate the market, accounting for over 90% of the AUM. However, active ETFs emerged as a rapidly growing category, accounting for around 60% of new launches and attracting nearly one-fifth of the total inflows. In comparison, the mutual fund industry faced challenges as investors increasingly shifted their focus towards the cost-effectiveness and flexibility offered by ETFs.
Asset Class Breakdown and Regional Distribution
Equity ETFs remained the most popular asset class, representing roughly 80% of the market and garnering more than two-thirds of the net inflows. Fixed income ETFs followed closely, accounting for 17% of the market and attracting approximately one-quarter of the inflows. Commodities and other asset classes, including the burgeoning crypto ETF space, made up the remaining 3% of the market.
Geographically, the Americas listed ETFs continued to dominate, holding more than 75% of the global AUM. The Europe, Middle East, and Africa (EMEA) and Asia-Pacific (APAC) regions also witnessed significant growth, with both markets following the trend of increased adoption of active ETFs.
Key Trends and Developments in 2024
The ETF landscape in 2024 was characterized by several notable trends. The intense price wars in passive ETF strategies gave way to a renewed focus on active ETF strategies, as investors sought to capitalize on the potential for outperformance. This shift towards active management posed a challenge to the mutual fund industry, with active ETFs likely to erode the market share of traditional mutual funds.
ESG (Environmental, Social, and Governance) and thematic ETFs continued to gain traction, although they still accounted for less than 10% of the global ETF AUM. Innovative investment strategies, such as options-based, single-stock, leveraged, and inverse ETFs, emerged as drivers of increased yield and volatility, catering to the diverse needs of investors.
Looking Ahead: Continued Growth and Innovation
As we move into 2025 and beyond, the ETF market is poised for further expansion. The key drivers of growth are expected to be the continued low-cost exposure, the transition to active management, problem-solving through innovative investment strategies, and the widening of asset classes.
The record-breaking year of 2024 has set the stage for an exciting future in the ETF space. With its adaptability, cost-effectiveness, and ability to cater to a wide range of investor preferences, the ETF market is well-positioned to maintain its growth trajectory and shape the investment landscape in the years to come.
