Sandra Testani, CFA, CAIA, of American Century Investments has published ETFs Defying Gravity, which examines the soaring flows into ETFs in 2024.
In 2024, ETF flows reached record levels, gathering $1.1 trillion in new assets for the year. Flows were especially strong in the fourth quarter. With $426 in net new flows, October, November, and December each ranked in the top four of all-time monthly flows. This growth spurred the US ETF market to reach $10 trillion in total assets, one-third of the assets in the total managed funds industry. While mutual fund assets remain larger than ETF assets, mutual funds continue to experience asset outflows.
This growth was driven by active ETFs, which, at 55%, had nearly five times the asset growth rate of passive ETFs. Active ETFs were 77% of new ETF launches in 2024. With 26% of all flows in 2024, active ETFs have grown to 8% market share of all ETFs. ETFs continue to broaden their investment objectives, with recent or planned launches including bitcoin, collateralized load obligations (CLOs), private credit, and options-based strategies.
Rule 6c-11, enacted by the US Securities and Exchange Commission (SEC) in September 2019, paved the way for the growth of actively managed ETFs. This rule allows managers to use custom baskets for the creation and redemption of ETF shares—which is the mechanism that enhances the tax efficiency of active ETFs. Recognizing investors’ preferences for the ETF vehicle, managers are seeking to transform existing strategies and converting them to the ETF wrapper—primarily mutual funds, but also some closed-end funds, separately managed accounts and even hedge funds. Additionally, dozens of asset managers have filed requests with the SEC to offer ETFs as a share class of their actively managed mutual funds.
Active fixed-income ETFs reached $2 trillion in total assets, growing at twice the rate of active equity ETFs. In 2024, fixed-income ETFs attracted 30% of all flows into fixed-income funds and have grown to 18% of all ETF assets.
American Century is the fourth-largest issuer of active ETFs and the 13th-largest issuer* of all ETFs, with offerings in fixed-income, small-cap value, international equities, systematic active strategies, and other investment objectives.
Resources:
ETFs Defying Gravity: 2024 Flows Surpassed the $1T Mark
Why Active ETFs May Make Sense in Today’s Bond Market
*Source: Morningstar data out of 336 ETF issuers overall and 291 active ETF issuers as of December 31, 2024.
ETF assets and flows as of 12/31/2024. Source: Morningstar Direct.
WEBCAST – Munis in the Second Era of Trump
The current climate of attractive yields and a steeper yield curve may bode well for municipal bonds. Meanwhile, the reshaping of tax policy in President Donald Trump’s second administration remains top of mind for investors. Join us as we assess the backdrop, focusing on:
- The market environment as the administration closes in on its first 100 days
- The potential political and tax implications of Trump’s agenda
- Investment opportunities and risks
Featured Speakers:
- Joe Gotelli, Vice President, Senior Portfolio Manager, American Century Investments
- David Moore, CFA, Vice President, Director of Municipal Research, American Century Investments
- Greg Torretti, Client Portfolio Manager, Senior Director, American Century Investments
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The opinions expressed are those of American Century Investments (or the fund manager) and are no guarantee of the future performance of any American Century Investments fund. This information is for educational purposes only and is not intended as investment advice.
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