Source: Statista, 2023
An incredible journey for ETFs: from $0 to $10T
Let’s put that $8.4T into context. If you add up the value of every professional football, basketball, baseball, soccer, and hockey team in the US, assets in ETFs are nearly 20x that value.2 Additionally, ETF assets nearly eclipsed a third of the US GDP in 2023.
Today, the demand for ETFs continues to rise, with issuers persistently introducing innovative products to meet the needs and preferences of investors, while offering very competitive fees. Total ETF assets represented only 18% of mutual fund assets in 2015,3 but have now climbed to 45%,1 and are projected to surpass mutual fund AUM in the coming years.
Innovations have driven ETFs’ asset gains
While several innovations and trends have driven ETF asset gains, one of the most noteworthy is active ETFs. With the potential to outperform the market—compared to passive ETFs which seek to match it before fees—active ETFs have caught the attention of investors. In 2023, active ETF assets grew by 37%, compared to passive ETFs, which only grew 8%.4
The rise stems from a combination of product development and legislation – such as the SEC’s 2019 passage of Rule 6c-11 (also called the “ETF Rule”) which opened the ETF market to more active ETFs. In addition to active ETF launches, we have seen mutual fund firms converting mutual funds to ETFs to increase tax efficiency for investors and meet buyer preferences.
Next for US ETFs – Crossing $10T in assets in 2027
As mentioned, US ETFs currently hold $8.4T in assets, and have averaged inflows of about $585B for the past 4 years,1 meaning assets are on track to reach $10T in 2027. While predictions are never an exact science, it is encouraging to know that ETFs could eclipse this psychological monetary factor of acceptance in short order. Additionally, ETF assets are said to be on track to pass mutual fund assets by 2038, according to published reports from Cerulli Associates.5
We believe the future is bright for ETFs, including active ETFs, and Natixis Investment Managers is pleased to have a diverse selection of these tax-efficient, cost-conscious investment vehicles available to our clients.