Investing.com — Alternate-traded funds are reshaping world markets with record-breaking progress. In 2024, the ETF trade reached $15 trillion in belongings, noticed $1.6 trillion in inflows, and launched 1,485 new funds, based on a Financial institution of America be aware.
ETFs now supply traders liquidity, tax effectivity, and market entry. Their influence is clear throughout developments reshaping the funding panorama:
Divergences in asset efficiency and ETF flows are narrowing. Treasury ETFs attracted $28 billion regardless of losses, whereas outflows hit rallying sectors like power and gold.
Flows sometimes observe returns. “We count on these positioning gaps to shut as traders reckon with the continued transition from a 2% world to a 5% world,” analyst wrote.
Lively ETFs overtook passive launches in 2024 for the primary time. Over 120 mutual funds transformed to ETFs, reversing outflows.
“Perhaps it’s actually ETF > MF quite than passive > lively,” analyst added.
ETFs are making illiquid belongings like collateralized mortgage obligations (CLOs) accessible, with AUM in these funds surging 245% final yr. Custom-made ETFs are additionally outperforming legacy indexes, with sector-specific funds, resembling industrials and protection, main the way in which.
Non-U.S. ETFs attracted $583 billion, accounting for 38% of complete inflows. For each U.S.-listed ETF, there are actually 2.1 funds domiciled overseas.
ETFs have additionally develop into extra subtle. Some now use AI or put money into derivatives and cryptocurrencies, additional increasing their attain.
Launched in 1993, SPY stays the most important ETF, however rivals like VOO are gaining floor. With a decrease expense ratio, VOO might surpass SPY by 2026.
As ETFs redefine investing, their affect reveals no indicators of slowing in 2025.
