Wall Street eyes another busy year for ETFs after flows jumped to a record $1 trillion in 2024

• ETFs are coming off a year of record growth, with inflows totaling more than $1 trillion for the first time.

• The funds have remained popular as investors continue to trade mutual funds for the tax efficiency of ETFs and the ease of trading.

• ETF experts say they expect continued explosive growth, especially in actively managed funds.

ETFs are coming off a great year as investors continue to swap Mutual funds To improve tax efficiency and ease of trading ETFs.

Annual inflows into U.S. ETFs totaled more than $1 trillion for the first time ever in 2024, smashing previous records by a landslide to bring the total market to $10.4 trillion as measured by total assets under management.

Funds tracking the S&P 500 once again saw the largest inflows, supported by an overwhelming preference for US stocks as the market enters the third year of its bull run, concluding 2024 with a 23% gain for the benchmark index.

US stocks, and the ETFs that track them, received additional support from… Donald TrumpThe United States wins the presidential election in November, as investors take into account corporate tax cuts and a more flexible regulatory environment. ETF inflows swelled to a monthly record high of $164 billion in November, according to data from… ETFGIa research and advisory firm affiliated with the European Training Foundation (ETF).

In addition to popular index funds, 2024 also saw the creation of the No. 1 position Bitcoin ETFs And a mutation in Raised funds Catering to the needs of risk-adjusted investors looking to magnify gains in individual stocks.

Investors and ETF managers are now hoping the party will continue in 2025, and they are largely looking to actively managed funds rather than traditional fixed-income ETFs or index-tracking ETFs, the sources said.

Active funds have soared in popularity in the past year, taking in $276 billion as of November, according to ETFGI data. This represents nearly a third of this year’s total flows and represents a 71% increase from 2023.

John Mayer, chief ETF strategist at JPMorgan, said active funds also dominated new launches as regulations around ETFs have eased in recent years, accounting for about 80% of all new ETFs launched in the year. the past.

He says this trend is likely to continue in 2025, especially as the market continues to expand and more stocks participate in the market rally.

“You have a lot of leading active providers coming into this space. The market has been dominated by big names like Mag Seven who have been really driving performance, and you see the breadth of the market. This creates other opportunities, particularly in the active space,” he said. .

Within the huge opportunity for active funds in the coming year, Mayer says, he sees particularly ripe potential within fixed income.

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