ETF assets in the U.S. grew by 28% in 2024 to end the year at $10.36 trillion, driven both by market appreciation and a calendar year record $1.12 trillion of net inflows. Growth-oriented cyclical themes like crypto and the “Magnificent 7” dominated the best-performing ETF categories based on total returns in 2024.
The Hashdex Bitcoin ETF (DEFI), which can have both spot and futures-based bitcoin exposure, was up 109.4% in 2024. Tech-oriented ETFs like the Roundhill Magnificent Seven ETF (MAGS) and the Defiance Quantum ETF (QTUM) returned 62.7% and 50.4%, respectively. The Global X MSCI Argentina ETF (ARGT) was up 61.6% in 2024, driven by investor optimism around President Milei’s reform agenda. The VanEck Video Gaming and eSports ETF (ESPO) rounded out the top five categories based on 2024 returns.
Active ETFs Grew by Taking Market Share from “Smart Beta” ETFs
Active ETFs continued to take a growing share of U.S. ETF inflows, rising to 24.6% in 2024 from 14.6% in 2022. This shift is often characterized as an active vs. passive debate, but the trends are more nuanced. Active ETFs largely grew at the expense of “smart beta” ETFs, with the latter’s share of inflows falling to 7.7% of inflows in 2024 from 18.7% of inflows in 2022 (see Figure 2). In fact, the annual inflows into “smart beta” ETFs in the U.S. declined by 24% to $86.4 billion in 2024 from $113.1 billion in 2022. This is explained by the fact that some of the fastest growing active ETFs are from providers like Dimensional and Avantis, which use a systematic multi-factor investing approach. From an investor’s perspective, these ETFs are a substitute for indexed, rules-based factor ETFs, and therefore compete for the same investment dollars.
Meanwhile, the flows into traditional indexed ETFs continued to be strong with annual inflows growing by 89% to $759.3 billion in 2024 from $402.4 billion in 2022. Table 1 highlights how well-known, traditional indexed ETFs make up nine of the top 10 ETFs by inflows in the U.S., with no active ETF making the top 10 list.
U.S. ETF Issuer Leaderboard Evolves as Active ETF Issuers Grow
The two largest issuers, Vanguard and BlackRock, continued to dominate the industry, taking in a combined share of 53% of ETF inflows in the U.S. However, the rest of the leaderboard is continuing to evolve as active ETF issuers take incremental market share. For example, JPMorgan had a 1.6% share of U.S. ETF net assets at the beginning of 2024, but took in 3.9% of inflows during the year. Similarly, Dimensional and Capital Group also took in a share of flows that exceeded their market share at the beginning of the year.
Looking Ahead
The previous year will be a difficult act to follow in terms of the volume of aggregate net inflows. Inflows in 2024 exceeded $1 trillion due to multiple factors, including the success of spot crypto ETFs, a strong U.S. equity market, and the conversion of mutual funds to ETFs. For reference, the yearly inflows in 2022 and 2023 were $603 billion and $585 billion, respectively. Looking ahead, we expect that the ETF industry in the U.S. will have another strong year in 2025, but exceeding $1 trillion again seems unlikely. CFRA projects that net inflows will be between $500 billion and $1 trillion in 2025. However, if the ETF as a share class of mutual funds structure gets approved by the U.S. Securities and Exchange Commission (SEC) this year, flows could receive an additional boost.
Aniket Ullal is SVP, ETF Research and Analytics for CFRA, one of the world’s largest providers of independent investment research.