The year 2024 began with approval of the first U.S. spot bitcoin ETFs and ended amid multiple incinerated industry records.
Last year will be a tough act to follow, but there’ll be plenty of topics to watch in 2025, experts say, including active ETFs, share class relief and efforts to wrap private assets in ETFs.
Nate Geraci, president of The ETF Store, an investment advisory firm specializing in ETFs, said “2024 was the year of the bitcoin ETF. Period.”
“We’re talking about the single-most successful product category launch in industry history,” said Geraci, who prior to the January 2024 launch of the first U.S. spot bitcoin ETFs had predicted the category’s success. Geraci added that 2024 also marked “the first time that the (U.S. ETF) industry has eclipsed a trillion dollars in inflows in a calendar year.”
Net inflows into the U.S. ETF industry in 2024 through the end of November totaled a record $1.03 trillion, according to ETFGI, a research and consultancy firm. That beat the previous record set in 2021, when $803.4 billion flowed in during the first 11 months, ETFGI said.
Bloomberg Intelligence Senior ETF Analyst Eric Balchunas and Rony Abboud, chief marketing officer at Trackinsight, a Pensions & Investments partner that provides a global ETF selection and analysis platform, concurred with Geraci that spot bitcoin ETFs grabbed the spotlight in 2024.
“It took over all of our brains,” Balchunas said.
As for 2025, Geraci, Abboud and Balchunas cited a variety of contenders for the spotlight. They include the active ETF juggernaut as well as whether the Securities and Exchange Commission will grant applications for exemptive relief that would allow funds to offer both ETF and mutual fund share classes. Currently, Vanguard is the only firm that has relief to offer funds with such a structure. A Vanguard patent expired in May 2023.
Filings related to new types of cryptocurrency ETFs are also likely to be in focus, they said. In addition, efforts to wrap private assets in an ETF are also likely to be the 2025 spotlight, according to Geraci and Balchunas.
Active ETF juggernaut
The rise of active ETFs isn’t a new story, “but what’s amazing is it seems to be accelerating,” Geraci said, adding that he expects that in 2025 active ETFs will continue to account for the lions’ share of new ETF launches and “continue to substantially out-punch their weight” when it comes to net inflows.
“The driver is that traditional active fund companies aren’t tiptoeing around ETFs anymore,” he said. “They’re now offering their best portfolio managers and flagship investment strategies in an ETF wrapper.”
Assets under management in active ETFs globally totaled more than $1.1 trillion as of Dec. 9, according to Trackinsight data. In the U.S., active ETF AUM totaled $879.2 billion as of Dec. 9, up from $536.4 billion as of Dec. 31, 2023.
“I think that we’re going to reach $1 trillion in AUM in the states alone by early Q1 2025,” Trackinsight’s Abboud said. Net inflows into active ETFs in the U.S. totaled $270.3 billion this year through Dec.9, nearly double the $140.8 billion U.S. active ETFs took in for all of 2023, Trackinsight data shows.
Share class relief and a friendlier SEC
“A big catalyst to watch … is whether the SEC approves ETF share classes to be bolted onto mutual funds,” Balchunas said during Bloomberg’s ETFs in Depth event, held Dec. 12. “We think they’ll probably approve it,” he said, especially given the fact that there will be a new SEC chair.
Paul Atkins, President-elect Donald Trump’s choice to lead the SEC, is likely to be friendlier to the regulated financial industry, sources told P&I.
“To us, we think this is going to be huge for ETFs, because who wouldn’t switch if you can switch without a tax implication,” Balchunas said regarding the potential share class relief. “The ETF share class is going to drain the (mutual fund) if this happens.”
Relief relating to a multiclass structure will be a “big story” in 2025, Geraci said, adding that “many of the biggest names in asset management” are now pursuing exemptive relief from the SEC.
“Vanguard is already utilizing this for index-based funds, but now we have the two other largest ETF issuers that are pursuing this,” he said. “In my opinion, firms like that don’t get involved here unless they have genuine optimism that the SEC will approve this structure.”
On Oct. 30, BlackRock, the world’s largest asset manager, joined the parade of firms seeking exemptive relief from the SEC to offer ETF share classes of mutual funds, a filing shows.
On its heels came a filing indicating State Street Global Advisors’ desire for relief that would allow ETFs to offer mutual fund share classes.
Trackinsight’s Abboud also expressed optimism regarding the potential for the SEC in 2025 to grant the share class relief issuers are seeking.
“I’m optimistic considering there are over three dozen ETF issuers, including big names, that have filed for this, alongside the more ‘open minded’ stance of the incoming administration,” he said.
Abboud added that many expected approval of U.S.-listed spot bitcoin ETFs once BlackRock filed for such a product given BlackRock’s “strong approval track record and the firm’s significant weight and status in the industry.”
As of Dec. 19, BlackRock’s iShares Bitcoin Trust ETF had $53.4 billion in net assets.
Among firms keeping an eye on potential share class relief is MFS Investment Management, which established the first U.S. open-end mutual fund more than 100 years ago.
“We have not filed at the moment,” said Vivian Tung, senior managing director and investment product specialist for ETF products at MFS, adding, however, that MFS is watching developments regarding share class relief closely.
MFS entered the ETF market with the Dec. 5 launch of its first five actively managed ETFs.
Wrap it up: Private asset ETFs
Efforts to wrap private assets into ETFs likely “will be one of the most closely followed stories in the industry next year,” Geraci said, adding that “issuers are working overtime” trying to figure out how to wrap private assets — such as private credit, private equity and private real estate investment trusts — into an ETF.
“I think this will be the next frontier of ETF innovation,” he said.
Balchunas also cited private assets as an area to watch.
“This is like the Holy Grail,” he said during the ETFs in Depth event. “Can you put something illiquid into something liquid? Well junk bonds kind of did it, but this is (an) earthquake filing from State Street and Apollo.”
Balchunas was referencing a Sept. 10 filing for the SPDR SSGA Apollo IG Public & Private Credit ETF.
Typically, at least 80% of the fund’s net assets would be invested in a portfolio of investment grade debt securities, “including a combination of (i) public credit related investments and (ii) private credit investments sourced by Apollo Global Securities, LLC,” the filing said.
Some, however, have raised concerns regarding the proposed ETF. For example, in an Oct. 4 letter to the SEC, Micah Hauptman, director of investor protection at the Consumer Federation of America, said the filing “raises significant issues related to liquidity, valuation, and conflicts of interest.”
Crypto products, options-based ETFs
“There are currently filings for ETFs that would hold Solana, XRP, Litecoin and HBAR along with crypto index ETF filings from Grayscale and Bitwise,” Geraci said, adding that “the crypto regulatory winds have clearly shifted” following President-elect Donald Trump’s win.
The Trump administration is expected to take a much friendlier approach to crypto, “which would obviously benefit the ETF space,” he added.
“My expectation is that ETF issuers are going to push the envelope here, and they’re going to test the limits of the SEC under the Trump administration because there’s really no downside to doing so,” Geraci said.
“We’re going to continue to see just a wave of filings around crypto-related ETFs.”
