The ETF sector will undergo major transformations leading up to 2025, with new products and strategies emerging as global assets reached a record $15.1 trillion at the end of November.
The sector generated nearly $220 billion in net inflows in November, bringing net inflows this year to more than $1.6 trillion. according to ETFGI.
“2025 will be all about niche and breakthrough themes in active ETFs,” said Gavin Filmore, CRO at Tidal Financial Group. “Think emerging technology, renewable energy supply chains and breakthroughs in health innovation.”
The innovation goes beyond traditional investment approaches artificial intelligence It is playing an increasingly important role in portfolio management and analysis, Filmore explains.
As the industry expands, three key trends are poised to reshape how investors access the markets in 2025: the evolution of active management, the growing adoption of crypto-focused products, and the rise of complex investment strategies .
The active ETF According to Brian Jacobs, investment strategist at Aptus Capital Advisors, the landscape is transforming from simple mutual fund conversions to new structural approaches.
“Active ETFs change the script of investment funds,” says Jacobs. “Investors love the transparency, intraday liquidity and lower costs. Mutual funds still dominate retirement accounts, but with ETFs making their way into 401(k) plans, the writing is on the wall.”
Structurally efficient and options based active ETF products demonstrate more ambitious goals in terms of portfolio differentiation and risk management, Jacobs explains.
“Our products will look and feel very, very different from the broader market,” he added.
The innovation is evident in the way capital-efficient hedged equity ETF strategies handle market downturns. When markets fall 20%, these new active strategies aim to drop only half, rather than slightly outperform traditional actives, Jacobs noted.
This shift represents a broader evolution in active management as companies move beyond simple stock selection and integrate structural efficiencies and tax benefits unique to ETFs, Jacobs said. The trend is likely to accelerate in 2025, especially as more companies take advantage of new ETF share class structures that allow mutual fund conversions.
The rise of crypto ETFs has helped bridge the gap between traditional financial and digital assets, creating new opportunities for mainstream investors to access this emerging asset class, said David Lavalle, senior managing director and global head of ETFs at Grayscale.