ETFs in 2025: Rising Growth and 2026 Momentum

The global market for exchange traded funds (ETFs) and exchange traded products (ETPs) continues to increase in breadth, depth and complexity. This article looks back at 2025’s remarkable growth and explores the prospect of even greater scale and sophistication in 2026 and beyond.

Executive summary

• We forecast ETF AuM of over $6tn in Europe and $40tn worldwide by 2030
• The industry is seeing unprecedented innovation and growth… creating some bottlenecks
• Active ETF explosion is transforming the sector – boosting growth and sophistication
• Retail growth in Europe shows no sign of slowing
• A tokenised ecosystem is beginning to emerge: Yes, this is happening
• The outlook is for growing complexity and competition, making fee pressure relentless
• Focus, differentiation, execution and capacity are key to building scale, ensuring liquidity, and achieving continued success

1. Accelerating growth, innovation – and complexity

2025 was another year of record-breaking growth for the ETF industry. Global assets under management (AuM) increased from US$14.9tn to US$19.9tn during the year. Rising markets played a role, but so too did an unprecedented US$2.4tn in net inflows¹.

Drawn by track record, innovation and growing choice, investors of all types are adopting ETFs for a range of purposes including core allocation, exposure management, thematic trading, and currency hedging. Net inflows increased across equities, fixed income, alternatives and digital assets in 2025.

The US remains the mainstay of the industry, recording growth of nearly 30% for 2025 and reaching total AuM of US$13.4tn by year end. Net inflows above US$1.5tn surpassed 2024’s record by more than US$300bn. However, growth rates were stronger in Europe at 41%, where ETFs added net inflows of US$397bn to reach a year-end total of US$3.2tn.

Year-on-year expansion was even more remarkable in Canada (47%, reaching US$584bn), while strong growth in Asia-Pacific (53%, reaching US$1.74tn) was supported by structural factors such as Australian superannuation and retirement reform.

Passively managed ETFs continue to dominate global AuM, but it was the outsized growth of active ETFs that made headlines during 2025. Active ETFs (see Section 3, below) accounted for US$1.9tn in AuM by year end, just under 10% of the industry total, but generated 24% of net inflows. In the US, active ETFs accounted for 33% of net inflows². Other notable areas of ETF growth and innovation include:

• Alternatives, including private credit. Demand for alternatives is driving the creation of funds backed by these hard to access assets. Infrastructure, commodity and property-focused ETFs/ETPs have launched in several markets. Appetite for private credit, especially in the US, has led to the launch of ETFs exposed to BDCs or private credit managers, but to date these have had limited success. In future, there could be scope for ETFs to hold digital tokens representing illiquid alternatives or real assets.
• The use of derivatives. More ETFs are using derivatives to manage volatility or generate income, and more allocators are making use of them. Buffer (or defined outcome) ETFs that place limits on downside risk and upside gains – within defined timeframes – are in demand from risk-averse investors and those near to retirement. Covered call ETFs/ETPs selling call options generate fee income for investors, but capital growth is limited by strike prices.
• Single stock ETFs. These tactical tools provide leveraged or inverse exposure to specific indices or stocks. Although not novel, new launches continue, especially in the US where many leading tech stocks are tracked by multiple single stock ETFs. High risk-return profiles make leveraged ETFs tools for sophisticated investors; the SEC recently denied applications for ETFs with up to 5x leverage³. Single stock covered call ETFs have also begun to appear.
• Thematic ETFs. Thematic funds have existed for at least a decade, but their popularity has surged recent quarters as investors make rapid shifts in exposure to key themes such as AI. Worldwide, thematic ETF assets grew by 49.6% to reach US$468bn in the first 11 months of 2025, with technology, defence and climate change among the most traded themes.
• CLO ETFs. ETFs tracking senior secured loans now represent tens of US$bn in AuM. Appetite for high quality floating rate credit has been helped by monetary shifts, and European demand was supported by Solvency II reforms making CLOs more appealing to EU insurers⁴.
• Fixed maturity bond ETFs. These funds combine the fixed maturity of an individual bond with the diversification of a basket of securities. Despite having only appeared in 2023, the market already features scores of ETFs with AUM in the billions of dollars.

Rapid global growth in ETFs and ETF providers is creating some localised stumbling blocks. Talent shortages, distribution scarcity, service provider concentration, and bottlenecks in authorised participants’ capacity are all making themselves felt.

However, the industry’s expansion is spurring banks, brokers and securities servicers to step up investment in their ETF capabilities. ETF promoters are also beginning to explore the benefits of digitisation, including tokenisation (see Section 4, below).

Overall, the outlook for the ETF industry is clearly positive. Despite the potential for equity market corrections to slow the breakneck growth of recent years, we expect accelerating innovation, adoption and geographic reach to drive continued double-digit expansion. We predict total ETF AuM to reach over $6tn in Europe and reach $40tn globally by 2030.

2. Active momentum is reshaping the industry

Innovation is nothing new in the ETF world, but the global active boom feels quantitatively and qualitatively different from previous evolutions in the industry.

Active ETF assets grew by 65% worldwide in 2025, attracting net inflows of US$637bn to reach US$1.9tn in AuM. One recent study expects global active ETF assets to reach US$6tn by 2030⁵.

Size is only half the story, however. Active ETFs now outnumber passive ETFs in the US⁶, and every 2025 entrant to the Australian market was an active manager. In Europe, new active issuers in 2025 included T Rowe Price, M&G, Royal London, Schroders, Jupiter and Columbia Threadneedle. Active momentum is reshaping the ETF industry.

Active ETFs allow issuers to tap into growing inflows, as well as offering fees on average 25bp higher than for passive ETFs⁷. For investors, the low cost and high liquidity of active ETFs compared with mutual funds makes them an appealing tool at a time of volatile markets and shifting interest rates. This is illustrated by the success of fixed income funds, which attracted 37% of global active ETF net inflows in 2025, and the popularity of currency hedged ETFs.

Until recently, many active ETFs featured ‘shy active’ index enhancements such as sector overweighting. Many issuers, wary of mutual fund cannibalisation or the loss of intellectual property, hesitated to embrace fully transparent ETFs.

The approval of ‘semi-transparent’ ETFs in markets like Luxembourg and Ireland was intended to address this issue. In fact, relatively few semi-transparent ETFs have been launched to date. Instead, active ETF issuers are increasingly embracing full transparency. Recent quarters have seen a marked uptick in the number of research-led, high conviction active ETFs being launched.

Of course, the proliferation of active ETFs is not without its risks:

• At fund level: Transparency makes subscale ETFs more visible than mutual funds. An ETF that fails to gain traction will find less support from market makers, leading to wider spreads and lower trading volumes.
• At firm level: New entrants can underestimate the operational load of compiling portfolio composition files, negotiating custom baskets, and meeting T+1 settlement. Cost buildup can erode profitability, and growing competition seems likely to erode active ETF fees.
• At industry level: If the pace of active ETFs launches exceeds the rate of active ETFs’ AuM growth, fragmentation will be inevitable. Where funds struggle to achieve scale, issuers will be at risk of a self-defeating race to the bottom on fees, with more losers than winners.

Addressing these challenges will be key to achieving success with active ETFs. As discussed in Section 5, new entrants must be especially mindful of the need for access to every element of the ETF ecosystem.

Set against that, the number of players entering the active ETF space is a clear sign that asset managers expect ETFs to increase their share of actively managed investments over time. The long-term growth potential is huge given that – for example – actives represented just 4% of European ETF assets at the end of October 2025⁸.

3. Retail adoption in Europe continues to build

The European surge in retail ETF adoption is gaining momentum. Germany continues to set the pace with 14.5m ETF holders⁹ generating €20.5bn of ETF inflows during the first quarter of 2025 alone¹⁰. But other markets are catching up. The number of French ETF investors grew by 117% in 2025¹¹, and ETF investors in the Netherlands tripled between 2022 and 2025¹².

Younger generations, who are most likely to invest in ETFs and crypto, are the engine of this expansion. One study from 2025 showed that 72% of European investors planning to make their first investments in ETFs within a year are aged 44 or under¹³.

Youthful demand reflects a digital distribution boom. Generation Y and Z are more self-directed, more online, and more likely to make digital investments. Online brokers and neobanks are competing via low-cost offers, portfolio management tools and fractional investing. Many providers are investing in investor education, and some are partnering with wealth managers or robo-advisors to offer holistic guidance. Recent examples of distribution agreements include:

• Fintech Revolut adding hundreds of ETFs to its trading platform¹⁴
• UK digital bank Monzo partnering with BlackRock to offer ETFs through its app¹⁵
• Amundi extending its partnership with Scalable, offering 300 ETFs to users¹⁶

As a result, the use of online savings plans (OSPs) to make regular, predetermined ETF purchases is rising fast. The number of monthly OSP executions has been predicted to exceed 53m by 2030¹⁷. Neo brokers XTB and Saxo are expanding their savings plan offerings, and the digital wealth arms of ABN Amro and PostFinance have also launched ETF savings plans¹⁸.

Regulatory tailwinds for retail growth include the easing of restrictions on crypto investment, and the introduction of tax-incentivised Savings & Investment Accounts (SIAs) in EU member states including France, Italy, Denmark, Sweden, Finland and Hungary. The EU hopes to encourage wider adoption of SIAs, and plans to introduce clearer disclosures of investment fees and value for money.

Looking ahead, there is strong untapped potential for retail growth across Europe, which has a population more than double that of the US. One recent study expects the European industry to gain 8.7m new investors within a year. In the longer term, there is latent demand in number of markets.

Over half (55%) of German investors own ETFs, but other key markets such as France (21%), Italy (14%), and the UK (12%) have a long way to go to match this¹⁹.

This suggests that European retail will remain attractive to issuers. Of course, expansion has its risks: Focused strategies, clear prioritisation and effective cost control are key to maximising return on expenditure. But many firms expect the potential inflows to outweigh possible downsides. That’s true both for new entrants with a limited track record, and for established issuers – as illustrated by JPM’s recent launch of actively managed multi-asset ETFs²⁰.

4. Tokenisation – implications coming into focus

The digitisation of global investment markets is accelerating, powered by demand from Generation Z, institutional appetite for ‘digital diversification’, growing political support, and advances in blockchain technology.

This tectonic shift is apparent from the growth of crypto ETFs/ETPs. In the US, spot Bitcoin products have held over US$120bn in assets²¹, a multi-digital asset ETP has launched, and an application has been made for a Bitcoin ETP incorporating the use of options²². Elsewhere, 2025 saw the UK’s first Bitcoin ETP launched and Australian crypto ETP assets grew by 69%. In February 2026, Luxembourg approved limited crypto exposure for UCITS funds²³.

However, it’s the potential to replace traditional assets with digital tokens that could have the greatest disruptive impact on ETFs. As Larry Fink has put it, “Every stock, every bond, every fund, every asset can be tokenised. If they are, it will revolutionize investing”²⁴. Tokenisation provides immediate, transparent and secure digital ownership of underlying assets. Real and illiquid assets like real estate or private credit are the most obvious candidates, but the tokenisation of registered funds is also receiving growing focus from leading financial institutions.

The potential benefits of fund tokenisation include fractional ownership, frictionless settlement, and reaching new investors. Tokenisation could provide an alternative to ETF conversion for mutual funds, and is already authorised in markets like the US, Singapore, Luxembourg, Switzerland and Hong Kong. The UK’s FCA has also conducted a recent consultation on the topic.

For now, the shape of a future digital ETF ecosystem is unclear. Unanswered questions remain over chain ownership, token creation, trading, settlement, distribution and interoperability with conventional investment operations. Issuers face potential risks including complexity, cost layering, margin erosion, and disintermediation.

Even so, fund tokenisation has already begun. Several US money market funds – effectively, digital securities paying interest – are hosted on the Solana blockchain. One US issuer has launched a similar product in Luxembourg²⁵, and another has applied to launch a tokenised bond ETF²⁶. Related developments in the wider investment ecosystem include:

• Large asset managers testing settlement layers, moving capital on and off blockchains using stablecoins and fiat currencies
• Trading and settlement venues such as DTCC²⁷, LSE²⁸, and Nasdaq²⁹beginning to move custodied assets onto blockchains
• ETF authorised participants conducting proof of concept testing for tokenised ETFs

With more issuers beginning to actively plan the creation of tokenised ETFs, possible routes for industry-wide tokenisation are coming into focus. These could include:

• Fully native: Issuing digital native ETFs ‘on chain’, creating tokens instead of shares.
• Digital wrapper: Creating digital tokens that represent existing ETF shares.
• Digital twinning: Creating a second, digital register of ownership alongside existing ETFs.
• Synthetics: Mimicking the effects of ETF tokenisation via the use of smart contracts.

It will be years before the ‘end state’ of tokenisation becomes apparent, but it’s already clear that the ETF industry can’t afford to ignore the far-reaching implications of this seismic change. Issuers should ask themselves: How might we acquire the necessary technological, investment, capital markets, and distribution capabilities? Now is the time to engage with potential digital partners and begin exploring the pros and cons of different approaches.

5. A wave of new entrants, using varied routes

The active ETF boom is drawing a surge of issuers – ranging from global asset managers to niche investment houses – to enter the industry. The US market gained almost a thousand new ETFs during 2025, while Europe and Asia-Pacific gained over 300 and 700 new ETFs respectively. In many markets, competition between global ETF issuers and domestic providers is increasing.

The market entry options available to new ETF issuers are growing more varied and sophisticated. For the largest asset managers, developing proprietary ETF capabilities is often the preferred choice. These firms can frequently harness their own technology hubs, distribution networks, and capital markets capabilities. Acquisitions of ETF providers, or mutual fund conversions are options too.

Asset managers can also partner with a growing range of white label ETF issuers. In 2025, white labelling was used by local and US issuers to launch active ETFs in Europe. For issuers, white label options now include leveraging service providers’ operations to support proprietary ICAVs or SICAVs; making use of host ETFs issued by white label providers; and harnessing add-on services such as access to distribution networks. Some large, established ETF issuers have also launched single platform solutions spanning the full ecosystem, effectively offering ‘ETFs as a service’.

Another potential market entry route involves launching an ETF share class of an existing mutual fund. This has obvious appeal for firms with large mutual fund ranges, and has the potential to improve tax treatment and boost investor access.

However, and despite the SEC’s August 2025 decision to approve multi-share class funds³⁰, ETF share classes have had limited success to date. In the US, only a few registration statements have been filed despite scores of applications being approved by the SEC, and by February 2026 only two issuers had launched ETF share classes of Irish mutual funds³¹.

In practice, the operational challenges of ETF share classes can be significant – especially for firms without existing ETF expertise. Common difficulties include a lack of third-party support, the loss of tax advantages for funds holding US assets, and cash drag arising from structural incompatibilities.

Whatever route they choose, new entrants seeking quick ETF scale need to remember the importance of capital market support; the need for specialised management and administration; the complexities of regulation and reporting; and access to suitable sales and distribution networks.

Conclusion: What enables growth to continue?

ETF growth and innovation are accelerating, attracting more investors and issuers. That is requiring individual firms and the wider ecosystem to develop ever-greater expertise and capacity.

Despite this picture of increasing specialisation and complexity, ETF providers can’t lose sight of the importance of scale. Operational efficiency, strong liquidity, and effective distribution are just as important to success as product innovation.

In addition, many issuers are placing strategic bets on ETFs at a time of unprecedented financial and operational pressure. Trying to do more with less could increase short to medium term pressure on profitability.

In this environment of increasing sophistication and competition, success depends on:

• Strategic clarity: Aligning ETF models with group-wide fundamentals, business models, and sources of competitive advantage.
• Robust execution: Achieving best in class capabilities across capital markets, sales, distribution, administration, compliance, and operations.

New entrants – especially in the active space – need to optimise market entry choices and build end-to-end expertise. At the same time all issuers, both new and established, must ensure clear differentiation in a crowded market. In our view, strategic imperatives for 2026 include:

• Sharpen investment edge: Anchor product differentiation in active skills, efficient buffers, quality credit, or efficient exposure to core indices.
• Ensure capital markets excellence: Invest in authorised participant links, inventory management and spread control; prepare for progress on consolidated tape.
• Optimise retail channels: Design OSP-ready vehicles, simplify KID/KIID documentation, and offer model portfolios suitable for distribution via robo or bank platforms.
• Strengthen data and transparency: Operationalise required disclosures, aligned with IOSCO good practice, while protecting proprietary insights.
• Develop crypto strategies: Treat crypto exposures as programmatic allocations; monitor staking policies, custody and basis-trade dynamics across ETF wrappers.
• Prepare for tokenisation: Engage with potential digital partners, and explore possible routes for developing future technical capabilities.

Report contributors: Tim West, ETF UK Leader Partner EY UK, Aushir Shah, Senior Manager EY UK, John Oswald, Senior Manager, EY US, Trevor Meisel, Senior Manager, EY Oceania, Kristy Von Ohlen, EY Americas Assurance Advisory Wealth and Asset Management Leader EY US & Kyle Fresca, Partner, EY Luxembourg.