ETF inflows hit $1.4 trillion this year as the industry achieved what Bloomberg’s Eric Balchunas dubbed the “ETF Triple Crown” — record flows, close to 1,100 new launches, and record trading volume. Ben Johnson, head of client solutions at Morningstar, joined ETF Prime to break down how the industry reached $13.2 trillion in assets, now representing 37% of combined mutual fund and ETF assets.

The numbers reveal a dramatic power shift. Over the past decade, BlackRock, Inc. (BLK) and Vanguard Group combined for $3.8 trillion in net inflows while every other asset manager combined posted net outflows of $33 billion, according to Johnson. At the current growth rate, ETF assets will likely exceed mutual fund assets soon, and the number of ETFs will eclipse the number of mutual funds by early 2027.

Active ETFs drove 85% of new launches this year, but Johnson cautioned against viewing this as revolutionary. He compared the shift to moving from glass ketchup bottles to plastic squeeze bottles — the product inside remains the same, just delivered in a superior package. The ETF wrapper offers the same active management strategies with better tax efficiency and intraday trading.

Johnson called the “ETF as a share class” trend the story of the year. This approach allows asset managers to merge their mutual fund and ETF structures, enabling investors to hold the same underlying portfolio in either format. The shift signals the final convergence of mutual fund and ETF products, giving investors flexibility while managers consolidate their operations.

The secular growth story has persisted through market cycles for over three decades, according to Johnson. ETFs have grown in favorable conditions and accelerated during crises like 2008 and the first quarter of 2020, proving the shift transcends market environments.

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