ETFs Blew Past $1.25T in Flows This Year. What’s Driving Growth?

The word “record” gets thrown around a lot these days, but at least in the ETF industry, it’s for good reason.

Inflows have already surpassed $1.25 trillion so far this year and are on track to top $1.4 trillion by year’s end, already exceeding last year’s record of $1.1 trillion. The growth was driven primarily by active fixed-income products, according to two recent reports from State Street and Janus Henderson. The reports predict high active fixed-income inflows next year following uncertainty around monetary policy and tariff-driven volatility in the first half of the year. By keeping on top of flow trends, advisors can stay ahead of headwinds heading into the new year.

“Active management can pull on a lot of levers in terms of credit analysis and duration management,” said Matt Bartolini, State Street’s global head of research. “You’re seeing that come into play with flows … Those [flows] are just big, secular, ongoing, very consistent, and likely to continue into 2026 as well.”

Active Activity

Active fixed-income strategies, which combine active bond selection with the ETF wrapper, took in 33% of November’s inflows and 40% for the year. Part of the appeal is the sense of security they offer during times of market volatility, with adoption picking up during the downturns of 2008, as well as 2020’s pandemic and 2022’s high inflation. The tariffs imposed by the Trump administration in early 2025 added to their popularity. “The shaky market returns in November likely propelled the inflows, despite looming Fed rate cuts in December and into 2026 that will reduce the yield on those instruments even further,” State Street’s report notes.

According to the report:

• Short-term bond ETFs grew by more than $10 billion in November alone.
• Low-cost fixed-income ETFs took in 42% of overall fixed-income flows, while active fixed-incomes took in 40%.

Surprise, Surprise, It’s AI. Another major driver of ETF inflows has been emerging market funds, which rebounded after a slow start to the year. Emerging markets ETFs drew in $7 billion last month, their fourth-best monthly inflow ever, in part due to interest in international AI innovators.

“China, while behind the US in terms of innovation and impact, is the secondary leader here in terms of AI [and] its impact on the broader economy,” Bartolini told ETF Upside. “You have all of these things lining up: a reversal of sentiment … and really an underrepresented acknowledgement that EM is AI.”