ETF Boom 2024: A New Chapter in the Investment Landscape

Exchange-Traded Funds (ETFs) are fundamentally transforming modern finance. The year 2024 is emerging as historic for the industry. With an impressive $1.6 trillion in inflows this year alone, Bank of America reports a remarkable milestone. The global ETF market now boasts an astounding volume of $15.1 trillion in assets under management. The number of new ETF developments reached a new high in 2024 with 1,485 launches. Institutional investors continue to increase their involvement, solidifying ETFs as a cornerstone of modern investment strategies. This dynamic highlights the transformation within the ETF ecosystem and underscores its significance. Over the past five years, the global ETF market has grown at a robust annual rate of 19%, with a total volume exceeding $15 trillion. Since 1993, a total of 15,866 ETFs have been launched, with 1,485 added in 2024 alone—a record for both actively managed and U.S.-listed ETFs. Institutional investors, individual investors, and even resource-constrained investment funds are considering ETFs due to their liquidity, tax efficiency, and cost advantages. While ETFs have traditionally been dominated by passive strategies, actively managed ETFs are increasingly penetrating the market. In 2024, 18% of total inflows were allocated to active funds, indicating a growing demand for alpha strategies. Nevertheless, passive funds remain dominant, with over 50% of equity fund assets by assets under management. Ninety-three percent of ETFs track an index, yet the allure of active strategies is driving innovation. Investors seeking more active strategies in passive funds are also promoting the conversion of mutual funds into ETFs. According to Bank of America, this trend is likely to increase in the coming years as mutual funds struggle with relevance. The SPDR S&P 500 ETF has been considered the largest and most actively traded ETF since its introduction in 1993, but its dominance is being challenged. The Vanguard S&P 500 ETF, with an expense ratio 6.5 basis points lower than SPY, could surpass it in assets under management by 2026. In 2024, VOO recorded more than six times the inflows of SPY.