Investors just bought a record amount of ETFs. And what they're buying including the S&P 500 says a great deal about their portfolio strategies going into 2025.
More than $1.88 trillion flowed into global ETFs last year, says ETFGI, an industry research firm. Putting that massive haul into perspective, it's nearly 46% more than the $1.29 trillion plowed into ETFs in the second-busiest year in 2021. Now $14.9 trillion is invested in global ETFs, the second-highest number on record and up nearly 28% from the end of 2023.
"In the U.S., there were three main areas of demand, but most ETFs saw net inflows," said Todd Rosenbluth, director of research at TMX Vetta Fi. Investors' popular choices of ETFs point to three distinct goals.
Reasons For ETF Inflows
Using ETFs to get low-cost exposure to the U.S.' biggest S&P 500 index stocks remains the most popular strategy.
All three of the ETFs to get the most net new assets are all linked to the S&P 500. That included the No. 1 ETF for flows in December, iShares Core S&P 500 which hauled in $23.1 billion in the month. It was followed by SPDR S&P 500 ETF Trust with $12.4 billion and Vanguard S&P 500 gaining $11.3 billion. For the year, the Vanguard ETF grabbed $116.4 billion pushing its assets to $583 billion — nearly surpassing SPDR S&P 500's $626 billion in assets.
Additionally, broad low-cost index bond funds continue to shine. Vanguard Total Bond Market ETF brought in $19.1 billion in assets in 2024. Investors like how these low-cost index funds instantly expose their portfolios to key asset classes, Rosenbluth says. These ETFs "serve as building blocks for many strategic investors to gain equity and fixed income exposure," he said.
Cryptocurrency Cashes In
The creation of cryptocurrency ETFs that track the spot prices of the digital assets have turned this into a major force.
The iShares Bitcoin Trust ETF pulled in $36.9 billion in assets last year. This ETF now has $51.5 billion invested in it. Cryptocurrency ETFs are also benefitting from the White House's leniency toward regulation of digital assets. "These ETFs, launched in January 2024, saw strong demand in the initial months and then again following the election on optimism of regulatory clarity and a supportive administration," Rosenbluth said.
Another area worth watching is actively managed ETFs. Many mutual fund companies tired of watching assets depart for ETFs are trying to compete. They're using human stock pickers to choose which investments go into these active ETFs. Rosenbluth says there's interest in some active ETFs, such as iShares U.S. Equity Factor Rotation Active ETF, Fidelity Total Bond ETF and Janus Henderson AAA CLO. None of these active ETFs, though, are in the top 20 asset gainers in December. "ETFs typically have lower fees, are more tax efficient and provide greater direct access to markets than mutual funds," Rosenbluth said. "However, strong performance for ETFs helped drive adoption, bringing in new money."
What Will Investors Jump Into In 2025?
All this begs the question: What will investors look to buy in 2025?
Expect more ETF providers to jump onto the crypto bandwagon with new approaches. "The supply of crypto related ETFs is going to accelerate," Rosenbluth said. "Calamos is launching three risk mitigation ETFs and others are likely to compete. We also expect more income-based crypto ETFs to come to market."
Dividend ETFs are already luring more attention in 2025. Rich dividends are more attractive with investors worried where interest rates are going. Lastly, expect more mutual fund companies to try to tempt investors with active ETFs.
"More asset managers are expanding their lineup of active ETFs, bringing their best strategies to market," Rosenbluth said.
Top 20 ETFs By December Net Inflows
| Name | Ticker | Assets ($ billions) | Net new assets, 2024 ($ billions) | Net new assets, Dec. 2024 ($ billions) |
|---|---|---|---|---|
| iShares Core S&P 500 | IVV | 579.3 | 86.7 | 23.1 |
| SPDR S&P 500 ETF Trust | SPY | 626.0 | 22.7 | 12.4 |
| Vanguard S&P 500 | VOO | 583.7 | 116.4 | 11.3 |
| iShares Bitcoin Trust | IBIT | 51.5 | 36.9 | 5.1 |
| Amundi S&P 500 II UCITS | LSPU | 20.0 | 7.8 | 4.3 |
| Vanguard Total Stock Market | VTI | 453.0 | 29.2 | 4.1 |
| iShares Russell 1000 Value | IWD | 63.3 | 2.1 | 4.1 |
| Samsung KODEX 200 | N/A | 3.7 | 3.5 | 3.7 |
| Invesco S&P 500 UCITS | SPXS | 38.7 | 11.0 | 3.7 |
| iShares Core MSCI World UCITS | IWDA | 94.7 | 16.0 | 3.5 |
Sources: ETFGI, S&P Global Market Intelligence, IBD
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