After 2024 surge, active ETFs poised to surpass passive strategies

After 2024 surge, active ETFs poised to surpass passive strategies
With 565 launches and $312 billion in inflows last year, active ETF strategies are set to continue taking dollars from mutual funds, says report.
JAN 15, 2025

After a banner year featuring a historic number of launches and a record-setting level of inflows, active ETFs are set to play an even more prominent role in the US investment space.

That's according to a recent report from analysts at National Bank, one of Canada's largest lending institutions.

Looking back at 2024, the researchers said US exchange-traded funds hit a significant milestone, with a record-breaking 700 ETFs launched throughout the year. Active ETFs took the lion's share, accounting for 77 percent of total launches with 565 new products getting listed on exchanges.

The number of active ETFs now stands at 1,840, just 235 short of passive ETFs. “At the current pace, active is expected to surpass passive in the next year or two,” the report said.

Looking at inflows, the report said active ETFs took in $312 billion in new money, more than doubling the previous record set in 2023. This brought active ETFs' share of total ETF inflows to 28 percent, a sizeable jump from 12 percent five years ago. Active fixed-income ETFs proved popular among investors looking to navigate interest-rate volatility, as did multi-asset strategies like option-based ETFs.

Fund conversions also played a role in the growth of active ETFs last year, with more than 50 mutual fund-to-ETF transitions. The report said Stone Ridge led the trend in 2024 with 32 target-date fund conversions. Fidelity, Vanguard, and BlackRock also participated in the trend, though National Bank's report didn't highlight them specifically.

Still, the $5.5 billion in assets converted from mutual funds to ETFs was notably lower than in prior years, the report noted. Among other challenges, the National Bank analysts said certain mutual fund strategies "may not be well-suited for the ETF structure," along with the operational hurdle of ETFs not being eligible investment options in many corporate sponsored 401(k) plans.

"Mixed asset growth results from past ETF conversions might have made mutual fund providers more cautious about entering the ETF space," the report said.

As ETFs thrived, mutual funds continued to struggle last year, according to the report. Citing figures from the Investment Company Institute, it said mutual funds saw $479 billion in outflows from January to November. Over the same period, ETFs' share of total fund assets – including ETFs, conventional mutual funds, and money market funds – rose by 3 percentage points to reach 27 percent, or 32 percent when excluding money market fund assets.

Latest News

Next-gen woman advisor managing $200M switches from UBS to Sanctuary Wealth
Next-gen woman advisor managing $200M switches from UBS to Sanctuary Wealth

Advisor joins the Partnered Independence model for new firm launch.

How did US institutional investors navigate the choppy waters of Q4, 2024?
How did US institutional investors navigate the choppy waters of Q4, 2024?

Median return for institutions managing a combined $1.4T revealed.

Trump set to hit foreign steel imports with 25% tariffs
Trump set to hit foreign steel imports with 25% tariffs

Canada, Mexico appear to be included despite pause on other levies.

Dollar gains on tariffs as trade fears intensify
Dollar gains on tariffs as trade fears intensify

Strategists see potential inflation impact, more cautious Fed.

Bond market experts expect yields to continue higher
Bond market experts expect yields to continue higher

Uncertainty set to keep upward pressure on fixed income investments.

SPONSORED Taylor Matthews on what's behind Farther's rapid growth

From 'no clients' to reshaping wealth management, Farther blends tech and trust to deliver family-office experience at scale.

SPONSORED Why wealth advisors should care about the future of federal tax policy

Blue Vault features expert strategies to harness for maximum client advantage.