BlackRock projects that global active ETF assets under management (AUM) will quadruple to USD4 trillion by 2030, from USD900 billion as of June 2024.
The firm writes that active ETFs are providing investors with the potential to unlock more value and opportunities by accessing new strategies and markets.
A new BlackRock paper, “Decoding Active ETFs: How the growth of active ETFs is unlocking innovation and opportunity for investors” outlines three key developments driving active ETF innovation and adoption, including US regulatory changes, the growth of fee-based advisory and model portfolios, and the rise of individual investors.
US regulatory changes: The 2019 ETF Rule streamlined processes, created a consistent framework, and added additional flexibility for issuers to launch and manage active ETFs. It also lowered barriers to entry for new ETFs, resulting in a flood of new entrants and more complex strategies within the US ETF landscape.
Of the more than 1,300 US-listed active ETFs, 1,100 of them were listed after adoption of the ETF rule.
In the years since this regulatory unlock, active ETF assets under management in the US have surged from about USD100 billion in 2019 to USD693 billion as of June 2024.
Growth of fee-based advisory and model portfolios: BlackRock writes that fee based advisers are increasingly using active ETFs as building blocks for model portfolios, with registered investment advisors accounting for nearly 41 per cent of all assets, up from 31 per cent in 2019.
The percentage of models holding at least one active ETF rose from 20 per cent in 2021 to nearly 32 per cent through 2023, while allocations for those advisors holding at least one active ETF, on average, increased from 12 per cent to almost 18 per cent.
Rise of self-directed investors through online brokerage platforms: The shift to commission-free trading by digital wealth platforms in 2019 has prompted more people to invest their own money to save for retirement or to meet other financial goals.
Individual investors have increased their exposures to active ETFs, going from USD9 billion AUM in 2019 to USD55.9 billion through March 2024.
BlackRock’s expectations for growth underscore how active ETFs are at the nexus of innovation within the industry, accounting for 76 per cent of all US-listed ETF launches in 2023, and 43 per cent of global ETF launches.
