ETFs Defying Gravity: 2024 Flows Surpassed the $1 T Mark

By nearly every measure, 2024 was another record-breaking year for the U.S. exchange traded fund (ETF) industry¹ on the back of strong equity and fixed-income markets.

• Overall, the U.S. ETF market ended 2024 with over $10 trillion in assets under management.

• Annual net flows surpassed $1 trillion for the first time, exceeding 2021’s previous high-water mark of $900 billion.

• ETFs represented 33% of the total managed fund industry at year-end.³

• Net flows in recent years have significantly favored ETFs, while mutual funds have suffered outflows; yet mutual funds still represent the larger pool of assets today.

• Five months of the calendar year exceeded $100 billion in net flows—a feat previously achieved only during December 2021 and December 2023.

• Fixed income, leveraged options, alternatives and digital assets saw sizable inflows.

Putting a lens on the fourth quarter, ETF flows were the largest on record, with October, November and December ranking as the fourth-, first- and second-best in monthly flows to date, respectively. Most asset classes and geographies posted positive returns for the calendar year. This broad strength indicates that investors were motivated by more than typical year-end tax trading.

Perhaps surprising to those who still associate ETFs with passive equities, some of the strongest growth rates in 2024 were attributed to active strategies, including active fixed income.

A Leader in Active ETFs

With more than 60 years of active management experience, American Century Investments’ clients have helped the firm become the fourth-largest active ETF issuer. As of the end of the year, we ranked 13th among all U.S. ETF issuers in assets under management and managed over $56 billion in ETF assets.*

We continue to see demand from investors for our range of low-cost, well-designed ETF strategies. Core offerings, particularly in fixed-income and small-cap value, have resonated with investors. Additionally, international equities and systematic active strategies managed by our Avantis Investors^® team have been key areas of growth.

See our full lineup of ETFs.

Active ETFs—Where the Money Is Going

Active ETFs are clearly playing a crucial role in the overall growth of the ETF industry. Since American Century Investments entered the ETF market in early 2018, active ETFs' assets under management (AUM) in the U.S. have grown from less than $50 billion to nearly $870 billion¹.

Notably, new inflows have been a stronger driver of growth for active ETF AUM than market appreciation. The organic growth rate¹ for active ETFs topped 55% in 2024—nearly 5x the growth rate of passive ETFs.

• Holding only 8% of market share, active ETFs accounted for approximately 26% of new net flows in 2024.¹

• The $292 billion of net flows directed toward active ETFs in 2024 outpaced the prior record set in 2023 by nearly 2.5x.¹

• Over 700 new ETF product launches occurred in 2024, with 77% actively managed.¹

^{¹ ETF assets and flows as of 12/31/2024. Source: Morningstar Direct.}

ETF conversions picked up steam as managers sought to transform existing strategies — primarily mutual funds, but also closed-end funds, separately managed accounts, and even hedge funds — to better meet investors’ vehicle preferences. In 2024, 57 mutual funds converted to ETFs, totaling $8.4 billion in assets¹.

Spotlight on Fixed-Income ETFs

Although the equity market continued to exhibit significant and persistent strength over the last two years, investors increasingly turned to fixed income as a portfolio ballast and income generator in 2024. Moreover, the strong divergence in returns between stocks and bonds over the past several years may mean that portfolio rebalancing benefited the asset class.

• Fixed-income ETFs represent nearly $1.8 trillion of the $10.3 trillion in total ETF assets, i.e., nearly 18% of the assets. They also attracted nearly 30% of fixed-income flows.¹

• Fixed-income ETFs overall achieved organic growth rates of roughly 20% in 2024, and active strategies saw flow rates above 60%¹.

New Year and Still Room to Grow

ETFs continue to serve as a hub for innovative ideas and continue to expand access to investment ideas that historically were reserved for large institutions.

Recently, innovation has taken a variety of forms, including options strategies, single-stock ETFs (and leveraged exposure in some cases to those single stocks) and the industry’s first ETFs offering direct access to bitcoin. New filings have sought to access areas historically viewed as less liquid, such as collateralized loan obligations, and even illiquid, such as private credit.

While we applaud the entrepreneurial spirit powering innovation, caution and due diligence is merited prior to investing. Not all of the newer, more complex products may be able to deliver the cost-effectiveness or tax efficiency that investors have come to expect from ETFs.

On the horizon is the potential for mutual funds to offer an ETF share class. At the time of this writing, nearly four dozen asset managers have filed for exemptive relief with the Securities and Exchange Commission. If and when that is approved, it has the potential as another significant accelerator of ETF growth.