Investors poured $4tn into US ETFs over past decade

Over the past decade, ETF assets have surged substantially more quickly than the money sitting in mutual funds, data shows.

In fact, when looking at the 10 largest providers of both products, assets in ETFs have ballooned three times as quickly over the past decade as the money sitting in mutual funds, according to an Ignites analysis of data from Morningstar Direct.

Combined, the 10 shops had $12.01tn in open-end mutual fund assets as of the end of 2023 — up 114 per cent from a decade earlier, the data shows.

Assets in ETFs, meanwhile, shot up 376 per cent during that time, reaching $7.29tn.

Industry-wide, $8.16tn sat in ETFs at the end of 2023 — up more than fourfold from a decade earlier, the database shows.

Assets in mutual funds, meanwhile, increased by just 71 per cent during that time, to $21.02tn.

During that time, investors poured $4.44tn into ETFs and took $950.8bn from their mutual fund counterparts.

Mutual funds have been around a lot longer than ETFs have and, therefore, have a much larger pool of assets in them. The first mutual fund will celebrate its 100th birthday this year. The first ETF, meanwhile, turned 30 last year.

Factors driving the massive ETF growth include mutual-fund-to-ETF conversions, newer entrants to the ETF market and huge inflows to standalone funds, said Andrew Guillette, vice-president of global distribution insights at Broadridge Financial Solutions.

ETF assets have grown more quickly than mutual funds

Asset manager	2013 Mutual Fund Assets	2023 Mutual Fund Assets	% change	2013 ETF Assets	2023 ETF Assets	% change
Vanguard	$1.9tn	$5.0tn	160	$333.9bn	$2.4tn	604
BlackRock/iShares	$190.8bn	$306.4bn	61	$659.7bn	$2.6tn	292
Fidelity	$1.1tn	$2.6tn	134	$631mn	$51.6bn	7,961
American Funds/Capital Group	$1.1tn	$2.1tn	93	n/a	$18.8bn	n/a
State Street	$21.5bn	$19.5bn	-10	$391.6bn	$1.2tn	212
Invesco*	$331.3bn	$254.3bn	-23	$115.0bn	$456.6bn	297
T Rowe Price	$416.9bn	$674.5bn	62	n/a	$2.5bn	n/a
JPMorgan	$219.6bn	$430.1bn	96	$5.9bn	$132.9bn	2,167
Dimensional Fund Advisors	$220.9bn	$387.5bn	75	n/a	$117.4bn	n/a
Schwab	$510.3bn	$165.1bn	-68	$28mn	$319.5bn	95
Ignites/Morningstar Direct *Data includes open-ended mutual funds and ETFs. It does not include money market funds or funds of funds. 2013 data includes legacy OppenheimerFunds mutual funds

Three of the 10 largest complexes entered the ETF space in the past few years.

Capital Group launched its first ETF in February 2022. Just last week, the company filed to launch four more ETFs, including an emerging markets ETF.

The firm had the fifth-largest active ETF line-up as of December 31, with $18.8bn in assets, Morningstar data shows.

In all, the ETFs garnered $10.3bn in net inflows last year. By comparison, the firm’s $2.49tn American Funds mutual fund line-up bled $43.1bn last year.

T Rowe Price, meanwhile, debuted its first ETFs in 2020.

The manager’s 15 ETFs had $2.5bn in assets as of year-end, and its 172 mutual funds had $854.7bn, according to Morningstar.

Dimensional Fund Advisors also entered the ETF space in 2020, launching two active products. A year later, it converted its first set of mutual funds into ETFs.

The manager’s suite of more than three dozen ETFs drew $31bn in net inflows in 2023, finishing the year with $118bn in assets, up from $72bn a year earlier, according to Morningstar.

Its $416.8bn mutual fund line, meanwhile, leaked $25.5bn, the database shows.

Many of Dimensional’s largest ETFs were launched as mutual funds, including its $25.3bn US Core Equity 2 ETF, $9.7bn US Marketwide Value ETF and $9.3bn US Targeted Value ETF.

A Capital Group spokesperson declined to comment.

Spokespeople for Dimensional and T Rowe Price did not respond to requests for comment.

Other large firms that have refashioned mutual funds as ETFs include JPMorgan Asset Management and Fidelity.

JPMorgan Asset Management launched its first ETF a decade ago.

Since then, demand for the products has grown, said Bryon Lake, global head of ETF solutions for the firm, in an emailed statement.

“Our active ETF suite has seen very strong momentum, particularly over the last two years with some of the largest and fastest-growing active ETFs in the world,” he said. “We are now expanding our product set globally and expect continued strong demand for our active capabilities through the ETF structure.”

The firm’s best-selling ETF last year was its $31.8bn Equity Premium ETF (JEPI).

The ETF brought in $12.8bn in net inflows during 2023, or about a third of the $34bn that went into all JPMorgan ETFs last year, Morningstar data shows.

JPMorgan’s $488.4bn mutual fund line, meanwhile, added just $6bn last year, according to Morningstar.

Another factor driving the growth of ETFs is the active ETF boom, said Bryan Armour, director of passive strategies research for North America at Morningstar Research Services.

One advantage that ETFs have over mutual funds is that they are more tax efficient, Guillette said.

The built-in in-kind redemption process “greatly reduces capital gains borne by fund investors and intraday trading capabilities”, said Matt Apkarian, associate director of product development for Cerulli Associates.

Cerulli does not expect mutual funds to experience net inflows anymore, he said.

One saving grace for mutual funds could be their use within retirement accounts, Apkarian said.

Many recordkeepers still do not offer ETFs in 401(k) accounts because of operational issues.

But it is not just ETFs that are taking money from mutual funds.

Many of the largest fund companies, including BlackRock, have ramped up their suites of collective investment trusts and separately managed accounts over the years.

Across all BlackRock entities, US CITs had more than $1tn in total net assets as of September 30 2023, Morningstar data shows.

In the past decade, the company rolled out four BlackRock-branded fixed income SMAs and four equity SMAs, according to data from the company’s website.

The company also bought custom index SMA manager Aperio Group in late 2020. At the time, the deal was predicted to increase BlackRock’s SMA assets by roughly 30 per cent.

“We aim to offer our clients choice of strategy across index and active and choice in wrapper across mutual funds, ETFs, CITs and separately managed accounts to help them meet their investment objectives,” a BlackRock spokesperson said.