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Exchange-traded funds are rewriting the financial playbook, with 2024 marking a historic year for the industry.
From record-breaking flows to innovative fund launches, Bank of America detailed $1.6 trillion in ETF inflows this year in a new note. The global ETF market has grown to a staggering $15.1 trillion in assets under management.
Additionally, ETF launches hit an all-time high of 1,485 in 2024, and institutional ownership continues to surge, cementing ETFs as the cornerstone of modern investment strategies.
Here's how the ETF ecosystem is evolving — and why it matters.
Record Year for ETF Growth
The numbers speak for themselves: over the last five years, the global ETF market has grown at a robust 19% annualized rate, amassing more than $15 trillion in assets under management.
In total, 15,866 ETFs have been created since 1993, with 2024 alone contributing 1,485 of those — a record for both active and U.S.-listed ETFs.
Institutional investors, retail traders and even cash-strapped mutual funds are gravitating toward ETFs for their liquidity, tax efficiency and cost advantages.
The Rise of Active ETFs: A Balancing Act
While ETFs have historically been dominated by passive strategies, active ETFs are making their presence known. Active funds accounted for 18% of total inflows in 2024, signaling a growing appetite for alpha strategies.
Still, passive funds remain the kingpin, representing over 50% of equity fund assets by AUM.
In fact, 93% of ETFs track some type of index, but the allure of active management is pushing innovation.
Investors seeking more active strategies in passive funds are also driving mutual fund-to-ETF conversions. According to Bank of America, this trend is likely to accelerate in the coming years as mutual funds struggle to remain relevant.
SPY vs. VOO: New ETF Champion in the Making?
The SPDR S&P 500 ETF (NYSE:SPY) remains the largest and most actively traded ETF since its inception in 1993. But its throne is being challenged.
Vanguard S&P 500 ETF (NYSE:VOO) has a 6.5-basis-point lower expense ratio compared to SPY and could potentially surpass it in AUM by 2026.
In 2024, VOO registered more than six times the inflows obtained by SPY.
Fund Flows: The Biggest Winners of 2024
| ETF | Fund Flows YTD |
|---|---|
| Vanguard S&P 500 ETF (VOO) | $122.75 billion |
| iShares Core S&P 500 ETF (NYSE:IVV) | $48.97 billion |
| iShares Bitcoin Trust (NYSE:IBIT) | $37.04 billion |
| Vanguard Total Stock Market ETF (NYSE:VTI) | $29.96 billion |
| Invesco QQQ Trust (NASDAQ:QQQ) | $25.38 billion |
| iShares Core U.S. Aggregate Bond ETF (AGG) | $20.62 billion |
| SPDR Portfolio S&P 500 ETF (NYSE:SPLG) | $19.91 billion |
Data: TradingView as of Dec. 19, 2024.