2025 in Review: An ETF Hat Trick

Like a star player netting three goals in a single game, the ETF industry scored a hat trick in 2025: big launches, record trading volumes, and strong flows. In the U.S. market, over 1,000 new ETFs launched, 83% of them actively managed, and trading volume soared to $58.4 trillion, 1.25x the previous record of $46.5 trillion set in 2022. U.S. ETF flows surpassed $1.4 trillion in 2025, up 31% from 2024, and global flows surged past $2.2 trillion.

What 2025’s performance makes clear is that investors across the globe are using the ETF structure more broadly and creatively to access markets. In recapping 2025, we highlight three trends:

1. Active ETFs are going mainstream: The active ETF market posted record growth last year, with tremendous momentum in the fixed income and options markets.
2. ETF conversions are accelerating: Firms continue to expand their ETF offerings, with many converting legacy mutual funds.
3. ETFs democratize digital assets: Regulatory changes have fueled new launches and heightened investor interest in cryptocurrencies.

Active Management Takes Center Stage

Investors increasingly recognize that active ETFs are not equivalent to passive strategies, given their ability to actively manage risk, exposures, and outcomes. Education and time have played key roles in facilitating active ETF growth, which has set new records for flows and share of total ETF flows in 2023, 2024, and now 2025—another hat trick. U.S. active ETF flows surpassed $470 billion in 2025, a 59% increase from 2024, and accounted for 32% of all ETF flows.

Among strategies, fixed income and options ETFs have been instrumental in the active ETF landscape’s recent growth, especially in 2025.

• Fixed income ETFs surge: Nearly 80% of fixed income ETF launches over the past year were active ETFs, reflecting strong demand for strategies that can provide access to and navigate complex markets. In 2025, nearly $155 billion flowed into active fixed income ETFs, up from $100 billion in 2024. Nearly 40% of all fixed income ETF flows in 2025 were directed toward active strategies, lifting the share of assets in active fixed income ETFs from 15% to more than 20%. Globally, there’s room for significant growth: only 16% of fixed income ETF assets are actively managed, compared with 85% of fixed income mutual fund assets.

• Options-based strategies continue to appeal: Several acute bouts of market volatility over the past 20 years have made investors more intentional about the outcomes they pursue. Working in their favor, financial products have evolved to the point where volatility can be defined and managed. With interest rates lower, many investors have embraced options-based ETFs for income and diversification. In 2025, derivative income was the top category for active ETF flows, accounting for roughly 12% and fueling a surge in new offerings.

Mutual Funds Move Further Into ETFs

The active mutual fund industry had another challenging year in 2025, shedding $572 billion in assets, compared with active ETFs’ more than $450 billion in inflows. To capitalize on the ETF structure’s advantages, many issuers have turned to ETF conversions as a way into the market.

The conversion trend, which began in 2021, has followed a generally upward trajectory. In 2025, ETF conversions reached a new high, with 60 ETFs converting from mutual funds across 31 different firms. The converted ETFs—all but one of which are actively managed—hold $38 billion in total assets and have attracted $3.6 billion in inflows. More broadly, total assets across all converted ETFs exceed $260 billion, with $36.1Bn in flows in 2025. This momentum suggests that ETF conversions are likely to continue to reshape the investment landscape.

Crypto ETFs Come of Age

ETFs continue to democratize access to nearly all asset classes, including digital assets, enabling investors to gain exposure to cryptocurrencies through regulated, transparent vehicles. In 2025, digital asset ETFs, particularly those focused on Bitcoin, made headlines, reflecting the maturation of the crypto market and investors’ growing appetite for alternative sources of return and diversification.

As regulatory frameworks evolve and more products enter the market, cryptocurrency ETFs are poised to play an increasingly important role in portfolio construction. In September 2025, for example, the SEC reduced the crypto ETF approval timeline to just 75 days, paving the way for faster product innovation. Of the 115 digital asset ETFs now available, 65 were launched in 2025. Flows for the category climbed to $41 billion last year, with total assets approaching $150 billion.

What to Watch in 2026

As the ETF industry enters its next phase, we expect three main themes to shape the year ahead.

1. ETF share class evolution drives industry change: The SEC’s recent decision to permit ETF share classes for mutual funds could spark another wave of launches and add momentum to the ETF market. This will bring new issuers into the ETF marketplace along with existing issuers.
2. Fixed income is tapped more fully: Fixed income represents about 17% of the overall ETF market, but that share is on the upswing. Like equities, fixed income entered the ETF wrapper in a largely passive form. But unlike equities, fixed income is an inherently active market - a reality that is now clearly reflected in ETF flows. In 2025, a disproportionate share of fixed income ETF flows went to actively managed strategies, reflecting investor demand for flexibility, security selection, and outcome-oriented portfolio construction. As new ETFs come to market, designed to solve portfolio challenges across duration, credit, income, and risk management, we expect active fixed income ETFs to play a central role.
3. Alternatives become more accessible through ETFs: The increasing availability of ETFs in traditionally illiquid asset classes, such as private credit and private equity, is reshaping the investment landscape. As structural innovation accelerates, more managers are entering the market, making alternatives accessible to a broader range of investors. Asset growth in this areas remains a question mark.

As these developments unfold, investors should keep a close eye on the continued expansion and innovation across the ETF industry. We believe the industry’s ability to adapt and deliver new solutions is likely to accelerate in 2026, transforming how investors can access and allocate capital across asset classes.