Capital inflows, issuance volume, and trading volume all reached historical highs – ETFs continue to sweep the U.S. market
U.S.-listed ETFs have attracted $1.4 trillion in inflows so far this year, breaking last year's annual inflow record. At the same time, over 1,000 new products have entered the market, setting a historical high. The trading volume in the ETF market has also set a new annual record. The last time all three indicators set records simultaneously was in 2021, and the following year, risk assets plummeted significantly, with the S&P 500 index falling by 19%
The U.S. ETF industry set unprecedented triple records in 2025, with inflows, new product issuance, and trading volume all reaching historic highs. This tidal wave of capital, amounting to trillions of dollars, is propelling the $13 trillion U.S. ETF market into a new stage of development.
On Wednesday, Bloomberg data showed that U.S. listed ETFs have attracted $1.4 trillion in inflows so far this year, breaking last year's annual inflow record. At the same time, over 1,000 new products have entered the market, setting a historical high. The trading volume in the ETF market has also reached a new annual record.
This "perfect performance" has raised concerns in the market about the sustainability of the ETF boom. Eric Balchunas, a senior ETF analyst at Bloomberg Intelligence, stated that given the overly perfect performance of ETFs this year, investors should prepare for potential market adjustments next year.
The last time all three indicators set records was in 2021, and the following year, risk assets plummeted significantly, with the S&P 500 index crashing by 19%.
Trillions of Dollars Fueling Industry Surge
According to Bloomberg Intelligence data, U.S. listed ETFs have attracted new funds at a rate of about $5 billion per day this year, with low-cost index-tracking funds capturing the majority of the inflows. Actively managed products continue to expand their market share, accounting for over 30% of total industry inflows and about 84% of newly issued products.
The S&P 500 index has provided support for ETF growth by achieving double-digit gains for the third consecutive year, although the benchmark index has been oscillating within a range since October, impacted by Wall Street's skepticism regarding the massive capital expenditures of tech giants in the field of artificial intelligence, as well as uncertainties surrounding the Federal Reserve's future interest rate cut plans.
Todd Sohn, a senior ETF strategist at Strategas, predicts that while it may not achieve the "triple crown" again in the coming years, inflows and trading volumes will continue to set records. He believes that the number of issuances is the most challenging part, more reliant on market cycles, and a harsher stock market environment may mean reduced product activity.
Risks Hidden in the Leverage Single Stock ETF Boom
Leverage single stock ETFs have exploded in growth over the past few years, with options-based funds accounting for 40% of this year's issuance. Despite the inherent volatility of these funds often eroding long-term performance, retail investors continue to flock to these high-risk products.
Cracks have appeared in the single stock ETF space in 2025. AMD's stock price surged significantly in October, leading to the termination of the GraniteShares 3x short AMD exchange-traded product listed in Europe, which aimed to provide three times the inverse performance of that stock. Although the U.S. currently only allows single stock funds to have two times leverage, particularly volatile markets may also pose challenges for these products.
Roxanna Islam of TMX VettaFi stated that any setbacks will not halt the overall trend, but will only slow the pace of development. She believes that in the coming years, the industry may mature enough for growth rates to slow and stabilize, but regardless of net inflows, innovation will continue
Dual-Class Share Structure Becomes a Market Variable
A potential variable for the ETF industry next year is the introduction of dual-class share structures. The U.S. Securities and Exchange Commission has approved dozens of asset management companies, including Dimensional Fund Advisors, BlackRock, and Fidelity, allowing them to offer ETFs as share classes of existing mutual funds. This fund blueprint theoretically could map the tax advantages of ETFs onto mutual fund assets worth trillions of dollars.
While this could lead to a wave of new listings and inflows, the introduction of multiple share classes has raised many concerns. JP Morgan's report in May stated that successfully launching an ETF strategy "is not just about adding share classes to existing mutual funds and expecting them to gain assets." Royal Bank of Canada Capital Markets warned that a large number of new funds could put pressure on market makers with "limited" resources.
Balchunas pointed out that investors in ETF share classes may feel the pressure of "tax contagion" from mutual funds. In the event of large-scale capital outflows, all fund share classes will face the impact of capital gains distributions. He compared the ETF industry to "a tent being pushed from all sides by people," stating that the more it is pushed, the greater the likelihood of damage
