On this special episode of the “ETF of the Week” podcast, VettaFi’s Head of Research Todd Rosenbluth reviewed the ETF industry’s 2024 performance with Chuck Jaffe of Money Life. The pair discussed the ETF industry’s record breaking performance, evolutions in product development, and more.Chuck Jaffe: One fund industry on board for today. The expert to talk about it. This is a special holiday edition of the ETF of the Week.
Yes, welcome to the ETF of the Week, where we examine trending new, newsworthy, unique and intriguing exchange traded funds with Todd Rosenbluth, the head of Research at VettaFi. And at VettaFi.com, you’ll find all the tools and research you need to make yourself a savvier, smarter investor in ETFs.
But today, we’re not focusing only on one fund. We’re focusing in on the entire industry, as we do the first of a two-week year in review, if you will.
Todd Rosenbluth, it’s great to chat with you again.
Todd Rosenbluth: It’s great to be back, Chuck.
Chuck Jaffe: So rather than ask you for your ETF of the Week, what we’re going to focus on the industry this week, and then we’ll get more fund-specific into the specific ETF stories of the year next week. So rather than saying your ETF of the Week, it’s more your broad picture view of the ETF industry for this year. This year was…
Todd Rosenbluth: A $1 trillion industry. We now have $1 trillion that have gone into ETFs as we’re recording this for the calendar year.
That of course — not of course, but that is a new record. We had just over $900 billion a few years ago. $1 trillion is a tremendous milestone. It’s worthy of celebrating. It’s worthy of celebrating even from home, in my VettaFi sweatshirt, because I’m so excited for all the great things that have happened this year.
Chuck Jaffe: By comparison, I mean, obviously for most people, ETFs have taken over traditional mutual funds. There’s much less interest in them, but they’re still there. And they were bigger than $1 trillion. So, how much have they shrunk? And has the growth been at the expense of the traditional fund industry. or just in addition because people are saving more?
Todd Rosenbluth: So no, this is — ETFs have been gaining market share over mutual funds. So we have crossed the $10 trillion in assets under management mark earlier this year.
So that helps to put things in perspective. $1 trillion is a tremendous milestone. But a $1 trillion in an industry. Even though it is 30 years old, it’s still $10-11 trillion in the US overall. Mutual funds are still larger. Mutual funds have been bleeding assets for a number of years as ETFs have gained share.
Part of what’s going on is people are moving from mutual funds to ETFs. Younger investors are adopting ETFs instead of mutual funds. But we are also seeing at VettaFi that people who were using stocks only to get exposure are now using ETFs, either because there are products that are well suited for that, or as they’ve gotten older, they’ve gotten a little bit more comfortable in wanting to take on the diverse, or take the benefits, the diversification benefits of an ETF, holding a handful of stocks instead of one stock within a specific industry.
Chuck Jaffe: Are we also seeing a lot of conversions? You and I have talked about 1 or 2 funds where they went from a traditional mutual fund, and they created an ETF based on the same thing. Of course, there have also been some where they said, okay, we’re giving up the traditional structure and we’re going only to the ETF structure. Is that picking up?
I mean, is some of this consumer interest, or is some of this also the fund companies going, no, I’d rather be in the ETF business?
Todd Rosenbluth: So a good chunk of this is the asset management industry embracing the ETF structure. So there’s a couple of ways that you touched on. So one is converting an existing mutual fund with an asset base into ETFs.
And we’ve seen firms like this going back a few years. Dimensional Funds and JPMorgan have done so. Neuberger Berman has done that more recently. In 2024, they’ve converted — they were again, a large mutual fund company. They’ve converted a handful of strategies into the ETF structure. But then we’re seeing asset managers bring their best and brightest into the ETF marketplace with standalone products.
Either, versions of existing strategies but now available through ETFs, or they are just launching new ideas, and tapping into that expertise. In fact, we’ve seen a record number of ETF launches. We crossed the 700 mark recently, and I think we’re still going to get more launches based on what I’m seeing in planned press releases between now and the end of the year.
So 700 new products. Still of course, funds that are closing. But the ETF industry is continuing with their product development. That’s another great milestone. It’s healthy when we see new products, it’s healthy when we see products that weren’t gaining traction close. It’s a great time in the ETF industry.
Chuck Jaffe: Well you mentioned products that are not gaining traction closing. And in the traditional fund industry, when it was in the go-go phase of wow, it’s becoming everything to everybody. There was a lot of stuff that was thrown up on the wall, and a lot of it didn’t stick. And I always said if the fund industry was a meritocracy, about two thirds of these funds would go away.
Are we still in the Wild West? Here’s the goofy stuff? I mean, we saw things that a few years ago you couldn’t have imagined, like bitcoin funds and crypto funds this year. They’re now out and they’re very popular. But we’re also still seeing some goofy, you know, specialized idea. I mean, among the funds we lost this year was the funds that were tied to Jim Cramer, for example.
There’s still a lot of goofy stuff going on too, isn’t there?
Todd Rosenbluth: So there’s always going to be some niche oriented products that won’t gain traction. And so yes, when they close, that’s a good thing. If they’re an asset manager that’s focused solely on that, then that — and that’s not a good thing for that firm.
But we are seeing some of the leading providers on a regular basis. They’ll prune their lineup and to do so is appropriate. You know, BlackRock and Invesco tend to do so on a regular basis. But a firm like Roundhill, for example, they’ve had a lot of success with a couple of products. They’ve closed others this year so that they can concentrate. They have a Mag Seven product that has gained a lot of traction, and is likely to continue to gain traction with investors, which we’ve talked about throughout the year about the concentration of the markets and how investors want to embrace that concentration.
But I’m excited that we’re seeing some of those larger traditional asset managers that didn’t have an ETF presence or had dipped their toe into the ETF marketplace, that they’ve become more confident and comfortable in the ETF world. T. Rowe Price is a great example of that. They have had, you know, they have been in the market for a few years.
They launched with some of their semi-transparent products. Those products are still around, but they’ve been expanding their lineup in 2024. And I think they’re likely to continue to do so in 2025.
With Capital Group again, that launched a few years ago. But they have the American funds, and we saw them continue to expand their product lineup. So lots of new entrants into the marketplace.
But also, if we can take a moment to celebrate some of those older, incumbent products that crossed a milestone, I’d love to do so too.
Chuck Jaffe: Well, so go ahead. Is there a name or two there that really stand out to you?
Todd Rosenbluth: Well, listen, this is a conversation. I got to bring you back in at some point.
So the Vanguard 500 ETF (VOO A), which we had as an ETF of the Week a few weeks ago. We were citing that it was about to cross the $100 billion in assets under manage — I’m sorry, in net new money, $100 billion for one new ETF in a year. Roughly 10% of all of the assets going into one well-established product.
The iShares Core S&P 500 ETF (IVV A) that also crossed the $50 billion mark in terms of net inflows when I was looking at the data as we were recording this. It’s a great sign when we see those large, well-established products continue to gain traction. Of course, there’s competition. But for many investors that are listening to this, many of their advisors, they’ll start with the core S&P 500 as the building block of a portfolio.
So it’s great to see, as we see new entrants, in the marketplace that also includes new investors. And as they’re starting with a healthy core, that’s a great sign to me for what’s in store for the ETF industry in 2025 and beyond.
Chuck Jaffe: Last question. With all this growth, one of the things you have highlighted regularly in the ETF of the Week this year is new, or new-ish, actively managed ETFs.
And of course, with the ETF business started gaining traction, it was all index funds like the Vanguard 500 that you were just talking about, or it was smart beta funds, which are basically built around an index and don’t have an active manager.
What’s happening there in terms of — we’ve highlighted a lot of actively managed funds, but where is the active passive breakdown in all this money that’s flowing in?
Todd Rosenbluth: So we’ve seen a growing interest in active ETFs. It’s — roughly 25% of the flows in 2024 have gone to actively managed ETFs. We’re just below the 10% of assets under management that’s tied to active ETFs.
So this is still an index based world, whether that’s market cap or smart beta — Let me say that a different way. 90% of the overall assets are in what people would tend to think of as an index based product, or tracking the price of gold, which obviously is not actively managed, but the pendulum is swinging in favor of active management.
That I think is a good sign. Many people believe in active management, particularly within the fixed income world, to help them sort through the universe. So this is great, for investors that embrace it. But if you still want that simple, low cost, broad ETF exposure with the S&P 500 or the Barclays AGG, there’s very popular products from iShares, Vanguard, State Street, among others for investors to consume
Chuck Jaffe: Todd great stuff. We’ll be back next week to drill in on a couple of funds that had great stories during 2024. But meanwhile, happy holidays to you and yours. We’ll see you next week!
Todd Rosenbluth: Sounds great, Chuck.
Chuck Jaffe: The ETF of the Week is a joint production of VettaFi and Money Life with Chuck Jaffe. And yes, I’m Chuck Jaffe.
You can learn all about my hour long weekday podcast on your favorite podcast app, or by going to MoneyLifeShow.com.
And if you want to learn all about your favorite or your soon to be favorite ETFs, no better place to look then VettaFi.com, where they’ve got all the tools to help you become a better investor. They’re on X at @Vetta_Fi.And Todd Rosenbluth, their Head of Research, my guest, he’s on X too, at @ToddRosenbluth.
The ETF of the Week is here for you every Thursday, including during the holidays. So we’ll be back with another special holiday edition of the ETF of the Week next week. And until then, well have a great holiday everybody, and happy investing.
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