Active ETFs Poised for Massive Growth, BlackRock Reports

Active ETFs set to quadruple in size over next six years, driven by market volatility and investor demand.

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DJ
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Finance Reporter
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Reviewed by: etf.com Staff
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Edited by: James Rubin

BlackRock is projecting the active ETF market to reach $4 trillion by 2030, more than quadrupling in size from its current levels, according to a new report from the asset manager. 

The report, titled “Decoding active ETFs,” forecasts that active ETFs will account for 16% of the total ETF market, up from 7%. Active funds now hold $900 billion in assets. 

Several factors are driving this expansion:

Markets Favor Active Strategies

Higher market volatility is leading investors to seek actively managed strategies for their potential to outperform in uncertain conditions, the report said. The ETF wrapper offers an efficient way to access these strategies, combining the benefits of active management with ETF attributes like tax efficiency and transparency.

“Amid fluctuating market dynamics, outcome-oriented active ETFs help address investors’ specific investment objectives, whether that’s generating income, achieving growth or enhancing downside protection,” Raffaele Savi, global head of BlackRock systematic and co-head of systematic equities, said in the report.

Regulatory Changes Spark Innovation

The 2019 ETF Rule from the U.S. Securities and Exchange Commission created a favorable environment for a wider range of ETF strategies, according to the report. Since its adoption, over 1,100 new active ETFs have debuted in the U.S., with assets going from about $100 billion in 2019 to $693 billion as of June 2024.

Growing Adoption in Model Portfolios

Financial advisors, particularly registered investment advisors, are increasingly incorporating active ETFs into model portfolios. The percentage of models holding at least one active ETF rose from 20.3% in 2021 to 33.2% in the first quarter of 2024, the report said.

While active ETFs are growing rapidly, the report notes they remain a small fraction of the $26.9 trillion active mutual fund market. BlackRock expects both wrappers to coexist, with mutual funds remaining dominant in certain platforms like retirement accounts. 

A graduate of The University of Texas, Arlington with a BA in Communications, DJ has covered retirement plans, mortgage news, and financial advisor trends. His background includes producing daily content, managing newsletters, and engaging with industry experts. DJ is excited to contribute to ETF coverage and learn more about the $10-trillion-dollar ETF industry. Outside of work, he enjoys exploring New York City's food scene, anime, and video games. 

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