A Record-breaking $1 Trillion Poured Into ETFs This Year

In 2024, investors funneled over $1 trillion into U.S.-based exchange-traded funds (ETFs), breaking the previous record set three years ago and fueling optimism on Wall Street for an even stronger performance in the coming years.

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This remarkable rebound from the muted flows of 2023 underscored a renewed confidence in U.S. assets. The S&P 500’s impressive gain of roughly 25% during the year played a significant role, as did the ongoing trend of investors transitioning from mutual funds to ETFs, drawn by their tax advantages and ease of trading.

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By the end of November, total assets in U.S.-based ETFs soared to an all-time high of $10.6 trillion, marking a more than 30% increase from the beginning of the year, according to ETFGI’s monthly data. Brian Hartigan, head of ETFs and index investments at Invesco, noted that 2024 saw a “risk-on” sentiment among investors.

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“Confidence was clearly back this year,” he remarked.

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The surge in ETF assets provided a substantial boost for Wall Street, benefiting financial powerhouses like BlackRock, which reported record management fees. BlackRock’s stock hit unprecedented highs during the year. Smaller asset managers specializing in actively managed ETF strategies also enjoyed considerable success.

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The largest S&P 500 funds continued to dominate inflows. Invesco’s QQQ fund, which tracks the Nasdaq-100 Index, attracted over $27 billion in fresh investments by mid-December, a dramatic leap from the $7.3 billion it garnered in 2023. Hartigan described this as a “remarkable achievement.”

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Investors’ enthusiasm was particularly evident in November, with a monthly record of $164 billion flowing into ETFs following Donald Trump’s re-election. Many anticipate that lower taxes and reduced regulations under Trump’s administration could further fuel an already robust stock market.

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Fixed-income ETFs, which comprise a smaller portion of the market compared to equity funds, also had a strong showing in 2024. As the Federal Reserve began cutting short-term rates, investors sought to lock in higher yields, boosting demand for these funds. Although stock funds captured more than twice the inflows of fixed-income funds through November, bond ETFs experienced faster growth relative to their starting asset base. The inflows represented nearly 20% of total fixed-income assets under management at the start of the year.

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Nonetheless, U.S. equities maintained their dominance. By November, the rolling three-month differential between inflows to U.S. stock ETFs and all other ETF categories hit a record high, according to SPDR, the ETF division of State Street. Nearly all net inflows to stock ETFs—97%—went to U.S. equities that month.

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“There’s significant excitement around the idea of U.S. exceptionalism, particularly in terms of economic growth, corporate profits, and market performance,” said Matthew Bartolini, head of SPDR Americas research. However, Bartolini cautioned that the concentrated investments in sectors like large-cap tech stocks and U.S. equities might pose risks if market conditions shift.

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Active management emerged as another major growth area in the ETF space. While traditionally associated with passive, index-tracking investments, ETFs saw a surge in complex strategies, including options-based approaches and cryptocurrency funds. The approval in January 2024 for more than a dozen asset managers to launch ETFs offering direct bitcoin exposure spurred a sharp rally in the cryptocurrency. These bitcoin ETFs attracted billions in investments, becoming some of the most successful ETF launches in history.

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At the lower end of the risk spectrum, funds designed to appeal to retirees gained popularity. Dubbed “boomer candy” by industry insiders, these actively managed ETFs employ options-based strategies to reduce volatility and generate income, providing a balanced approach for older investors seeking stock exposure while mitigating risks.

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Active ETFs no longer represent a niche segment of the market. Through November, these funds accounted for about 30% of total ETF inflows, a shift that has brought relief to fund managers facing intense competition on fees. “Our average fee has actually increased because of the assets flowing into active strategies,” said David Mann, head of ETF product and capital markets at Franklin Templeton.

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The combination of record inflows, surging asset values, and expanding active management options has solidified 2024 as a transformative year for ETFs. With these trends likely to persist, Wall Street is optimistic about the continued growth and innovation within the ETF market heading into 2025.

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