ETF Assets Surpass $10 Trillion: Key Trends to Monitor

According to recent data from Cerulli Associates, the total assets held in U.S. exchange-traded funds (ETFs) surpassed $10 trillion for the first time in November.

ETFs, which invest in a range of assets such as stocks and bonds while trading on national exchanges, saw an influx of $156 billion in flows during the month, breaking previous records.

Cerulli noted that this surge in activity aligns with the heightened trading typically observed as the year draws to a close.

A separate analysis by Morningstar highlighted a “Trump bump” that contributed to U.S. funds—including both ETFs and mutual funds—accumulating $115 billion in November, marking the highest amount since April 2021.

As we approach the end of 2024, several significant ETF trends have emerged based on the latest data.

As of Monday, the S&P 500 index has risen nearly 24% year to date.

This remarkable rally can be attributed in large part to the “Magnificent Seven” stocks—Apple, Microsoft, Alphabet (Google’s parent company), Amazon, Nvidia, Meta Platforms, and Tesla—which collectively contributed to about half of the year’s gains for the index, as reported by VettaFi.

Notably, four of the top 10 ETF performers for 2024 in terms of flows are based on the S&P 500 index, according to Cerulli’s findings.

The Vanguard 500 Index Fund has emerged as the frontrunner for year-to-date inflows in 2024, followed by the iShares Core S&P 500 ETF, iShares Bitcoin Trust, Invesco QQQ Trust, Vanguard Total Stock Market Index Fund, iShares Core US Aggregate Bond ETF, SPDR Portfolio S&P 500 ETF, Vanguard Total Bond Market Index Fund, and Invesco S&P 500 Equal Weight ETF.

Malcolm Ethridge, a certified financial planner and managing partner at Capital Area Planning Group, emphasizes the efficiency of S&P 500 ETFs in his clients’ portfolios. These ETFs provide access to top large-cap growth firms while keeping costs significantly lower compared to actively managed funds.

He highlighted that while actively managed funds might charge between 50 to 75 basis points, a passive S&P 500 ETF could charge as little as 10 basis points.

The S&P 500 index, benefiting from an unprecedented rally, is positioned to continue its upward trajectory as it adjusts to reflect today’s market leaders.

Ethridge predicts that in 2025, SPY (SPDR S&P 500 ETF Trust) is likely to outperform the majority of fund managers.

However, Kirsten Chang, a senior industry analyst at VettaFi, cautions that the S&P 500 might not replicate the “historically rare” double-digit gains observed in the past two years. Wall Street forecasts indicate expected gains in the high single digits, with a potential slowdown in the returns of the Magnificent Seven and other mega-cap tech firms.

Chang notes, “While S&P 500 ETFs will continue to attract investors due to their low fees and liquidity, we anticipate a deceleration in the unprecedented inflow into these typical broad-based funds in 2025.”

In a noteworthy development, alternative ETFs exceeded $400 billion in net assets for the first time in November, according to Cerulli.

The year-on-year growth rate for alternative ETFs stands at a remarkable 93%, leading among all asset categories.

Approximately 80% of the alternative ETF market share—around $325 billion—comprises digital assets, as well as leveraged equity and derivative income ETFs, as highlighted by Cerulli.

Despite financial advisors reporting a mere 3.6% allocation to alternatives in 2024, this figure is expected to rise. Within the current alternative allocations, 14.4% is facilitated through ETFs, per the firm’s analysis.

As of January, bitcoin ETFs commenced trading on U.S. exchanges, and today, spot bitcoin ETFs hold more digital assets than those owned by bitcoin’s creator, Satoshi Nakamoto, according to VettaFi. Although the launch of spot ethereum ETFs has been relatively subdued this year, there is a prevailing sentiment that crypto ETFs are “here to stay.”

The top five ETFs launched in 2024 by assets are exclusively bitcoin ETFs, as identified by Cerulli through November data. They consist of the iShares Bitcoin Trust ETF holding the top position, followed by Fidelity Wise Origin Bitcoin ETF, ARK 21 Shares Bitcoin ETF, Bitwise Bitcoin ETF, and Grayscale Bitcoin Mini Trust ETF.

As institutional interest in cryptocurrency surges, financial advisors are increasingly having discussions with their clients about this emerging sector. Chang notes, “Even if some advisors remain skeptical about bitcoin, they recognize that conversations surrounding crypto with clients are unavoidable.”