What’s in store for ETFs in 2025?

As we enter 2025, we believe European equities stand to benefit from multiple performance drivers, while the backdrop remains supportive for high yield and investment grade credit, and sovereign debt.

With a great deal of uncertainty still to navigate, being selective will be key.

In 2024, around half the world’s population had the opportunity to head to the polls, most notably in the US. This year of elections presented investors with many questions and uncertainties over economic growth, inflation and interest rates.

It seems a large and increasing number of investors are looking to address those questions through ETFs, as 2024 proved a record-breaking year for flows into the ETF industry globally. This was especially true in the European space which saw a quarter of a trillion dollars of inflows.

In terms of exposures, US equity and fixed income ETFs were both strong areas of growth. With c.80% of ETF AUM globally still in equities, one of the more interesting trends that continued through 2024 was positive momentum in areas that represent demand for more choice by ETF investors. Fixed income ETFs continued to gather pace, as did ESG-related ETFs, while actively managed ETFs saw surging popularity drive $17bn of inflows.

As we enter 2025, what elements should ETF investors be weighing up as they consider their exposures?