In the next few days, the U.S. ETF industry could have more than $1 trillion of net inflows in 2024. As I write this, the ETFs have gathered $984 billion, according to Bloomberg. This will be a tremendous milestone for investors and asset managers alike.
A Billion Here, a Billion There…
For years, I’ve had editors and occasionally readers point out that I mixed up millions, billions and trillions when talking about an ETF size or its popularity. The numbers are often so large it is hard to get my head around. Indeed, the U.S. ETF industry first passed the $10 trillion asset milestone in September 2024. So $1 trillion in a calendar year is impressive.
In mid-November, a new calendar record was reached as iShares, Vanguard, State Street Global Advisors, Invesco and others pulled in more than $910 billion. The fourth quarter has already been one of the strongest ever. Net inflows exceeded $100 billion in both October and November.
Why Is $1 Trillion Meaningful?
This year will be remembered for many ETF milestones. In January, the first spot cryptocurrency ETFs began trading and have continued to garner attention throughout the year. Indeed, the iShares Bitcoin Trust ETF (IBIT) has nearly $50 billion in assets. In July, the first spot ethereum ETFs launched.
Early in the fourth quarter, fixed income ETFs set a calendar year record for asset gathering. The category is approaching $300 billion of net inflows for the full year.
However, $1 trillion industrywide is such an eye-catching number that it will likely cause people to pay more attention. As popular as ETFs seem, many continue to access the market through individual securities and/or mutual funds.
A mid-2024 investor survey conducted by State Street Global Advisors found that 45% of Americans were using ETFs in their portfolios. The majority of those ETF investors believed that ETFs made them a better investor. However, non-ETF investors were disproportionately unaware of how ETFs were priced and how they traded effectively. Most importantly (to me), the majority of non-ETF investors found it difficult to understand the differences between ETFs and mutual funds.
ETF Education Remains Important
In addition to a wave of cryptocurrency ETFs, many other new ETFs launched provide novel exposure. The list includes single-stock leveraged ETFs, structured protection ETFs, and private credit ETFs.
As cool as some of these products are, most investors will use broad, low-cost equity and fixed income ETFs as their starting and perhaps ending point. It is important that they understand the basics. For example, mutual funds are bought and sold at the end of the day based on the value of the securities inside. ETFs are bought and sold between 9:30am and 4:00pm ET based on the price someone will transact with you. This price can be slightly different from the value of the securities, but usually not enough to matter much.
I strongly believe that an educated ETF investor is a more satisfied investor. At VettaFi, through our written content, our virtual events and even our Exchange conference, education is at the center. I look forward to an even stronger 2025 for the ETF industry.
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