Can the ETF industry top its biggest year on record in 2025?

The Australian exchange traded fund (ETF) industry ended 2024 as its biggest year on record, smashing through previous highs set in 2021. But only two weeks into the new year, it’s already expected to set another annual record.

According to Betashares’ Australian ETF Review for the End of Year and December 2024, total market capitalisation hit a new high of $246.3 billion and saw 38.8 per cent (a record-breaking $68.9 billion) in year-on-year growth.

The industry also doubled the amount of net flows it received in 2023 with up to $30.8 billion in 2024, while its annual Australian Securities Exchange (ASX) trading value also increased by 23 per cent from the previous year to $141 billion in 2024.

The Betashares report echoed sentiments previously seen in analysis provided by VanEck, in which flows were concentrated among the top three issuers – Vanguard, Betashares and iShares – with approximately $24.4 billion in net flows between the three, accounting for 80 per cent of this year’s industry flows.

According to Betashares, there were 66 new product launches across Australian exchanges in 2024 – another new record.

Active investing also suffered in the ETF space, recording approximately $847 million in outflows during the year. There are now 53 ETF issuers in Australia.

The Vanguard Australian Shares ETF was the top product in 2024 by market capitalisation ($17.9 billion), followed by the iShares S&P 500 ETF ($11 billion) and the Vanguard MSCI Index International Shares ETF ($10.4 billion). This reflects the rush back to international equities seen throughout the year with $15.1 billion in inflows, followed by Australian equities ($7.7 billion) and fixed income ($6.1 billion).

However, when measured on performance, cryptocurrency and technology oriented took out the top spots: Global X 21Shares Bitcoin ETF (146 per cent), Global X FANG+ ETF (65.7 per cent), VanEck Video Gaming and eSports ETF (62.6 per cent), Global X 21Shares Ethereum ETF (59.9 per cent) and Betashares Crypto Innovators ETF (52.9 per cent).

“In our year-end report for 2023, we wrote: ‘In terms of 2024, we believe that the industry will continue to benefit from increased investor adoption and inflows combined with positive markets. As such, we forecast total industry FuM at end 2024 to exceed $200B and could reach as high as $220B depending on market conditions.’,” the Betashares report said.

“While we were correct regarding positive inflows and market growth, we underestimated the scale of net flows by some margin, while market conditions were very conducive for growth exposures which contributed strongly to the growth in market size.

“Looking ahead, we expect the ETF industry will exceed $300B by the end of 2025 should market conditions remain positive.”