In 2024, U.S. exchange-traded funds (ETFs) reached a historic milestone, with total assets climbing 28% to $10.36 trillion. This growth was driven by significant market appreciation and $1.12 trillion in net inflows, according to a report from CFRA.
Shift Towards Growth and Active Strategies
The surge in ETF assets signals a shift in how investors are accessing markets, with a growing emphasis on growth-oriented themes and active management strategies. These trends are reshaping the ETF landscape, which has traditionally been dominated by index-based funds, said Aniket Ullal, head of ETF research at CFRA.
Among the top-performing funds, the Hashdex Bitcoin Futures ETF (DEFI) stood out, leading all categories with an impressive 109.4% return in 2024. Other tech-focused funds also performed well, such as the Roundhill Magnificent Seven ETF (MAGS), which gained 62.7%, and the Defiance Quantum ETF (QTUM), up 50.4%.
Active ETFs Gain Market Share
Active ETF strategies accounted for 24.6% of total ETF inflows in 2024, a notable increase from 14.6% in 2022. In contrast, smart beta products experienced a decline in popularity, with inflows dropping to 7.7% from 18.7% over the same period, according to CFRA’s analysis.
The growing preference for active management came at the expense of more passive strategies, marking a shift in investor sentiment.
Vanguard and BlackRock Dominate ETF Flows
Despite the rise of active management, Vanguard and BlackRock maintained their dominance in the ETF space, together capturing 53% of all ETF inflows in 2024. The Vanguard S&P 500 ETF (VOO) led the pack, attracting $115.1 billion in new assets, followed by the iShares Core S&P 500 ETF (IVV) with $86.5 billion. The iShares Bitcoin Trust (IBIT) captured third place with $37.5 billion in inflows, marking a strong debut in its first year of trading.
JPMorgan and Other Active Players Gain Ground
JPMorgan also made a significant push into the active ETF space, capturing 3.9% of total ETF flows in 2024, despite holding just 1.6% of assets at the start of the year. Active ETF issuers, in general, saw increasing market share throughout the year, with firms like Dimensional Fund Advisors and Capital Group capturing more inflows than their market share would suggest.
Thematic and Sector ETFs Shine
Thematic ETFs also stood out, with the Global X MSCI Argentina ETF (ARGT) gaining 61.6%, fueled by investor optimism surrounding President Javier Milei’s economic reform agenda in Argentina. The VanEck Video Gaming and eSports ETF (ESPO) rounded out the top five, benefiting from the strong performance of the gaming sector.
Traditional indexed ETFs, however, continued to appeal to investors, with annual inflows growing 89% to $759.3 billion in 2024, up from $402.4 billion in 2022.
Looking Ahead: Strong ETF Growth Expected in 2025
CFRA projects that ETF inflows will range between $500 billion and $1 trillion in 2025. This growth could be further fueled if the Securities and Exchange Commission approves ETFs as a mutual fund share class, opening up additional opportunities for the industry.
The 2024 surge in ETF assets underscores the growing diversification of investment strategies and the expanding role of ETFs in global financial markets.
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