ETFs
US ETFs Expected to Surpass $10 Trillion by 2027
Nearly 35 years after their launch, the popularity of exchange-traded funds (ETFs) has not waned. Today, U.S. ETFs appear on track to reach $10 trillion in assets under management by 2027, according to Natixis Investment Managers.
Launched in Canada in 1990, exchange-traded funds (ETFs) were first created to provide investors with access to index investing. Since then, the number of asset classes and strategy types covered by these types of funds has exploded. From humble beginnings as indices, ETFs now offer investors exposure to spot bitcoin, carbon markets, call option strategies, and much more.
Long valued for their tax efficiency, ETFs also offer other portfolio benefits. Unlike mutual funds, ETFs trade throughout the trading day. This creates flexibility for advisors and investors who don’t have to wait until the close to settle their trades. They also typically have lower management fees than mutual funds and other types of funds.
According to Natixis, U.S. ETFs held $8.4 trillion in assets under management as of April 2024. “Let’s put that $8.4 trillion in context,” the authors write. “If you add up the value of every professional football, basketball, baseball, soccer, and hockey team in the United States, ETF assets are nearly 20 times that value.”
ETFs continue to grow their market share. In 2015, they accounted for just 18% of all mutual fund assets, but this year they account for 45%. Additionally, conversions from mutual funds to ETFs have gained momentum this year.
Natixis attributes much of the popularity and growth to actively managed ETFs, made possible in 2019 by the adoption of Rule 6c-11. Dubbed the “ETF Rule,” it expanded the potential scope of active strategies within the ETF.
The US ETF market has seen an average annual inflow of approximately $585 billion over the past four years. If this average continues, it will translate into over $10 trillion in assets under management for the US ETF industry over the next three years.
“While predictions are never an exact science, it is encouraging to know that ETFs could eclipse this psychological and monetary factor of acceptance in the near future,” Natixis writes.
The company currently offers a multitude of funds to investors, including the Natixis Gateway Quality Income ETF (IQ A) and the Natixis Loomis Sayles Focused Growth ETF (LSGR C). Also offered are the Natixis Loomis Sayles Short Duration Income ETFs (LSST B+) and the Natixis Vaughan Nelson Select ETF (VNSE B-).
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