The exchange-traded fund (ETF) landscape witnessed unprecedented growth in 2024, shattering previous records with a staggering $1.6 trillion in inflows, according to a new report from Bank of America. This surge propelled the global ETF market to an impressive $15.1 trillion in assets under management (AUM), solidifying ETFs as a cornerstone of modern investment strategies. This analysis from Hyperloop Capital Insights delves into the key trends and top performing funds driving this remarkable expansion.
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The ETF market’s exponential growth trajectory is evident in its 19% annualized growth rate over the past five years. Since their inception in 1993, a total of 15,866 ETFs have been launched, with a record-breaking 1,485 new ETFs introduced in 2024 alone. This encompasses both actively managed and U.S.-listed ETFs. The appeal of ETFs spans across diverse investor segments, from institutional giants to retail investors and even cash-strapped mutual funds, drawn to the inherent advantages of liquidity, tax efficiency, and lower costs.
Active ETFs Gain Momentum, But Passive Strategies Still Dominate
While passive strategies have historically dominated the ETF space, active ETFs are steadily gaining traction. In 2024, active funds captured 18% of total inflows, indicating a growing demand for alpha-generating strategies. However, passive funds remain the dominant force, commanding over 50% of equity fund assets by AUM. Despite the fact that 93% of ETFs track an index, the increasing interest in active management is fueling innovation within the ETF industry. The desire for active strategies within a passive fund structure is also driving the ongoing conversion of mutual funds into ETFs. Bank of America anticipates this trend will accelerate in the coming years as mutual funds face increasing pressure to adapt to evolving investor preferences.
Vanguard’s VOO Challenges SPY’s Reign as Top ETF
The SPDR S&P 500 ETF (NYSE:SPY), launched in 1993, has long held the title of the largest and most actively traded ETF. However, its dominance is now being challenged by the Vanguard S&P 500 ETF (NYSE:VOO). VOO boasts a significantly lower expense ratio, 6.5 basis points lower than SPY, positioning it as a strong contender to potentially surpass SPY in AUM by 2026. This competitive advantage is reflected in VOO’s 2024 performance, attracting over six times the inflows compared to SPY.
2024’s Top Performing ETFs by Fund Flows
The following table highlights the seven ETFs that led the charge in 2024, ranked by their year-to-date fund flows:
| ETF | Fund Flows YTD |
|---|---|
| Vanguard S&P 500 ETF (VOO) | $122.75 billion |
| iShares Core S&P 500 ETF (NYSE:IVV) | $48.97 billion |
| iShares Bitcoin Trust (NYSE:IBIT) | $37.04 billion |
| Vanguard Total Stock Market ETF (NYSE:VTI) | $29.96 billion |
| Invesco QQQ Trust (NASDAQ:QQQ) | $25.38 billion |
| iShares Core U.S. Aggregate Bond ETF (AGG) | $20.62 billion |
| SPDR Portfolio S&P 500 ETF (NYSE:SPLG) | $19.91 billion |
Data: TradingView as of Dec. 19, 2024.
Conclusion: ETFs Reshape the Investment Landscape
The record-breaking inflows and growth witnessed in the ETF market in 2024 underscore the transformative impact of these investment vehicles. The rise of active ETFs, the ongoing competition for market leadership, and the sustained dominance of passive strategies all contribute to a dynamic and evolving landscape. As ETFs continue to attract capital and innovate, Hyperloop Capital Insights will continue to monitor these trends and provide insightful analysis for discerning investors.
