Will 2024 Be ETF Industry's Best Year Yet?

Exchange-traded funds are hauling in investor cash at a blistering pace, on track to hit $1 trillion and top the record $902.6 billion (according to Morningstar) set in 2021.

In an Oct. 16 tweet titled “FLOWMAGEDDON,” Bloomberg analyst Eric Balchunas noted investors are putting $5 billion a day into ETFs, double the normal pace. The money is largely going into what he called the Three Amigos–the world’s biggest ETFs, one from each of the world’s three biggest ETF issuers, all of which track the S&P 500: The SPDR S&P 500 ETF Trust (SPY), the Vanguard S&P 500 ETF (VOO) and the iShares Core S&P 500 ETF (IVV).

While cash is pouring in, markets are soaring, pushing the 31-year-old industry’s total assets past $10 trillion for the first time. Investors are seeking to get in on those markets that are being propelled by artificial intelligence chips, financials, communications, utilities and more, which has pushed the S&P 500 23% higher this year and on track to crush its historic annual gain of 6.8%.

New ETFs Issued

Issuers are seeing opportunity here and are launching new funds faster than ever. According to ETFGI, whose founder, Deborah Fuhr, is a member of the etf.com editorial advisory board, 3,775 ETFs and exchange-traded-products trade in the U.S., more than double the 1,660 available 10 years ago. The current total has jumped 12% since the year began. A total of 341 issuers are managing ETFs.

Another source of industry growth has been big banks and asset managers migrating away from mutual funds in favor of ETFs. That movement shows no sign of slowing—more than half of wealth managers want asset managers to convert more mutual funds into ETFs, or create look-alikes/clones of existing acting funds, according to a survey from Broadridge Financial Solutions.

Assets are pouring in, markets are jumping, firms are probably hiring and bonuses must be coming. With interest rates appearing poised to be cut more, 2024 is set to be the ETF industry’s best yet.