RIAs increasingly invested in ETFs focused on specialized strategies and risk management in the first quarter of 2025, according to a new report from AdvizorPro, an Atlanta-based RIA and financial advisor intelligence platform.
For example, uncertainty about the direction of interest rates led to greater adoption of ETFs tracking ultrashort bonds and options trading. At the same time, concerns about inflation and geopolitical risks contributed to the growing popularity of ETFs tied to commodities and macro exposures.
“One of the interesting differences that was kind of new in the first quarter, and I don’t know if this is going to persist, but structured credit seemed to be having an uptick, which wasn’t there in 2024,” said Michael Magnan, founder and CEO of AdvizorPro. “Three of the top 10 fastest-growing ETFs were also CLO offerings.”
On the other hand, ETFs tracking digital assets saw significantly less growth in RIA adoption than they experienced in 202. “That pretty much came to a halt in going into the first quarter. It wasn’t zero growth, but it wasn’t close to what we saw in 2024. It’s not like everybody is de-allocating from those, but it just isn’t on the rise like it was.”
ETF categories that experienced the greatest growth in RIA adoption between the fourth quarter of 2024 and the first quarter of 2025 included systematic trends (11.3%), European stock (8.97%), multi-sector bond (6.61%), trading inverse equity (4.08%), equity precious metals (3.64%), miscellaneous region (3.56%) and defined outcome (3.13%).
These results built on trends witnessed in the fourth quarter of 2024, when RIAs were already increasing their usage of thematic and alternative ETFs.
AdvizorPro found that RIAs were willing to invest in ETFs carrying higher fees in exchange for strategy differentiation in a volatile environment. They also appeared more cautious about expanding their ETF exposures. Only 41.8% of RIAs increased the number of ETFs they held in the first quarter, compared to 66.9% during the previous year. At the same time, 37% of RIAs decreased their ETF holdings.
RIAs’ search for more specialized strategies resulted in outsized growth among newer ETF issuers. The top fastest-growing issuers among RIAs during the first quarter included Panagram Structured Asset Management (year-over-year growth of 41.5%), BondBloxx Investment Management (34.2%), Defiance ETFs (18.2%), Harbor (14.9%) and Calvert Research and Management (12.0%). Meanwhile, while well-established ETF issuer Franklin Templeton also saw respectable growth of 7.5% during the period, it placed behind eight other issuers on the list.
Drilling down to specific funds, the fastest-growing ETFs among RIAs with at least 50 clients included Pacer’s large blend COWG ETF (up 46.0% with 46 new RIAs), Panagram’s bank loan CLOZ ETF (up 42.3% with 22 RIAs), Simplify Asset Management’s systematic trend CTA ETF (up 41.8% with 43 RIAs), First Trust Advisors’ options trading GFEB ETF (up 24.1% with 21 RIAs) and BlackRock’s ultrashort bond CLOA ETF (up 21.6% with 16 RIAs).
Among newer funds (those launched within the past three years), AdvizorPro recorded the most RIA adoption of Pacer’s COWG (up 44.9% with 44 new RIAs), Simplify’s CTA (up 37.9% with 39 new RIAs), Panagram’s CLOZ (up 36.5% with 19 new RIAs) and First Trust Advisors’ GFEB (up approximately 23% with 20 new RIAs).
Looking at ETFs with the highest fees (those in the top 10% of expense ratios), RIA preferred a focus on structured outcomes and downside protection. Direxion Funds’ trading leveraged equity TSLL ETF showed the most growth during the quarter, with a 46% uptick in RIA adoption. TSLL carries an expense ratio of 0.0096%. Simplify’s systematic trends ETF came in second, with growth of approximately 42.8%, while Innovator ETFs’ options trading UFEB ETF came in third, with 35.1% growth. Simplify’s CTA ETF has an expense ratio of 0.0078%, while UFEB has an expense ratio of 0.0079%.
The report was based on the analysis of 13F filings and proprietary firm mapping. During the quarter, 5,136 RIAs reported ETF holdings across 3,740 funds and 242 issuers.