The global ETF industry recorded net inflows of $947 billion in the first six months of 2024. At this rate, it is on track to surpass $1 trillion in flows by the end of the year—provided there are no market collapses.
The goal, which would mark a record year in absolute terms, is not impossible to achieve, as the annual growth rate for 2024 is significantly higher than the same periods in 2022 and 2023, although it is currently lower than 2021.
This is the conclusion of a quarterly Morningstar report on global flows into ETFs, which also shows global assets in the ETF industry touched $13.4 trillion in September, $3.7 trillion more than a year earlier. Flows contributed $1.3 trillion. Investment growth did the rest.
96% of Flows go to Traditional ETFs
Despite issuers offering more sophisticated strategies, ETF investors still prefer traditional equity and bond replicants, which accounted for 96 percent of total flows in 2024. Notably, Morningstar data also shows an increase in the share of flows in fixed income in total inflows in the second and third quarters.
"Bond funds recorded flows of $127 billion in the third quarter, surpassing the previous record of $112 billion recorded in the second quarter of 2020, at the height of the market crash caused by the Covid pandemic," says Sylvester Flood, senior product manager at Morningstar Direct. Since the beginning of 2024, organic growth, calculated as flows relative to assets at the beginning of the period, has been 13.5%.
ETFs Also Advance in Europe
The US dominates the global ETF industry in terms of both flows and issuing companies. In terms of inflows, however, Morningstar data show an overtaking of the "rest of the world" in terms of organic growth since the beginning of the year (9% versus 8.4% in the US). In Europe, according to early estimates, net flows in the first nine months of the year totaled €161 billion, surpassing the 2023 as a whole. Total assets rose above €2 trillion for the first time in history.
With one quarter still to go, 2024 is shaping up to be a new record year for the European ETF industry, according to Jose Garcia-Zarate, Associate Director for Passive Strategies at Morningstar.
Equities have been the top performers since the beginning of the year, with net inflows estimated at €118.6 billion including €41 billion in the third quarter alone—followed at a distance by bonds with €39.3 billion.
In terms of issuing companies, the global industry sees the US as the leading player. The three largest companies in the world in terms of assets, iShares (BlackRock), Vanguard and State Street, have their headquarters overseas. iShares is also the most internationally diversified and the first in Europe, where it has a 43% market share. In the global ranking, the two largest players on the Old Continent, namely Amundi and Xtrackers, are sixth and seventh.
Active ETFs Assets Hit $973 billion
In addition to bidding to be a record year for ETF inflows, 2024 will surely be remembered for the rise of active ETFs, which invest in a portfolio of stocks or bonds chosen by a manager and differ from traditional ETFs that passively replicate an index. Since January, they have seen organic growth of 33%, compared with 7% for passives. The latter, however, remain the leading players in terms of absolute net inflows. In one year, assets in active ETFs rose from $683 billion to $973 billion.
