ETF Assets May Top $25 Trillion in the US by 2030
Citigroup analysts are projecting significant growth in the industry, while the research firm ETFGI is even more bullish than that.
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ETFs are looking a lot like Vin Diesel circa 2001: fast, furious and showing no signs of slowing down.
After a record year for launches, inflows and AUM in the US, assets in these funds could roughly double to $25 trillion by the end of the decade and hit $40 trillion by 2035, Citigroup analysts said in a recent note. While the industry held some $13 trillion in assets as of April, per FactSet data, even those numbers could be a bit shy. The research firm ETFGI is projecting assets to hit closer to $33 trillion by 2030, said founder Deborah Fuhr. It’s further proof that the ETF industry has plenty of room to run.
“It’s hard for the asset management industry to ignore that investors are preferring ETFs,” Fuhr said. “Most firms now are really looking to have some ETFs in their toolbox.“
Full Throttle
Pension funds, asset managers, hedge funds, advisors and retail investors are all pouring money into ETFs, which have the appeal of being more tax-efficient and lower-cost than their mutual fund counterparts. Citigroup said that active ETFs could drive a significant portion of the forecasted growth. Active funds have exploded in popularity of late, thanks in part to interest in single-stock and options-based strategies, structured product outcomes and alternatives funds including crypto ETFs. Mutual-fund-to-ETF conversions also hit a record high last year.
“We’re still early in the use and adoption of ETFs,” Fuhr said. But continued growth won’t come without challenges:
- There is concern about whether the number of authorized participants and market makers can keep up with all the new products, Fuhr said.
- One of the other challenges could be how tokenization impacts the growth of ETFs and mutual funds.
Still, the US ETF market has a lot going for it. For instance, Fuhr said that 24/7 trading, which major exchanges have been pushing for, could mean more investors turn to US ETFs when their markets are closed for the day.
Speed Bump: Not every fund will be around long enough to contribute to those AUM milestones, however. With the massive growth in ETF product innovation also comes record closures: 146 active ETFs shuttered last year, per Morningstar data.
