Global exchange-traded funds ( ETFs ) continue to swell, reaching a record of US$1.5 trillion in net flows in 2024, while assets also hit an all-time high of US$13.8 trillion, up US$2.7 trillion from 2023, according to a new report.
While a record year for flows on an absolute basis is noteworthy, just as impressive is the 13.6% annual organic growth rate in 2024. The larger the asset base, the harder it is to maintain a high rate, yet ETFs delivered their highest growth rate since 2021, Morningstar says in its latest Global ETF Flows report, using data as of December 31 2024.
Much of the current discourse in the fund industry is around innovations in alternatives and private-to-public offerings, but “pure beta” equity and fixed income strategies still overwhelmingly prevail in flows terms, the Chicago-based investment research and management firm notes.
The two bellwether funds captured 95% of flows, or US$1.4 trillion, and neither had a single month of outflows last year. Fixed income’s 18% growth rate was 50% higher than equity’s 12%, albeit beginning from an asset base only a quarter of equity’s size.
On the other hand, alternatives, which include digital asset funds, have barely made a dent in the universe, capturing just 3% of flows and holding 1% of assets.
Flows into ETFs domiciled in the United States spiked following November’s elections, notes Morningstar. Flows in the last two months of the year totalled US$310 billion. The US dominated global ETF assets and flows on an absolute basis; it captured 75% of flows in 2024 and holds 75% of the assets.
But the US is not leaving everyone else behind. While US ETFs grew 14% organically, ex-US ETFs grew 13%. Ex-US ETFs had a record year, too, soaking up US$377 billion, easily exceeding the previous mark of US$292 billion set in 2021.
Actively managed ETF assets surpassed US$1 trillion for the first time and grew almost 5x faster than passive ETFs. The category grew at a very robust 50% rate. Assets rose to US$1,075 billion from US$669 billion at the end of 2023, while flows increased to US$339 billion from US$161 billion.
Active ETFs’ share of all ETF assets increased to 7.8% from 6.2%, while passive ETFs grew at a still-robust 11% clip.
The three largest strategies – iShares S&P 500 Index, SSGA S&P 500, and Vanguard S&P 500 Equity – pulled in US$292 billion, or 19.5% of global flows, as their combined assets reached US$2.1 trillion. The US version, ticker VOO, ingested an astounding US$117 billion by itself, a record for any fund.
Invesco grew 21%, the highest rate among the largest ten asset managers. Meanwhile, Standard and Poor’s dominated flows among benchmark index providers, capturing US$475 billion in flows to products that track its indexes. It now commands a 28% market share, versus 23% five years ago, according to the report.