A milestone year for ETFs—and a potentially bigger one ahead

Each year, writing a forward-looking outlook feels a little like taking stock—not just of markets, but of the impressive strides the exchange-traded funds (ETF) industry itself keeps taking.

That reflection feels particularly appropriate for 2025, a milestone year for ETFs in Europe. What began as a niche innovation is now firmly embedded across portfolio construction for retail, advisory and institutional investors alike. The European ETF market has grown despite challenging periods of volatility and regulatory shifts. In doing so, we believe it has moved well beyond the “stress-test” phase into something more enduring: core infrastructure for modern and future investing.

What’s striking today is that this maturity is no longer confined to developed markets. ETF usage across Asia has reached record levels: ETF assets domiciled in the region topped US$2.4 trillion this year, supported by robust net inflows over the last two years of US$600 billion.¹ This is driven by a growing domestic investor base, improving market access and broader adoption across both equity and fixed income exposures. Latin America is also experiencing its strongest period of ETF engagement to date. ETF assets domiciled in the region ended the year just shy of US$23 billion. The market experienced US$4 billion in net inflows during 2025, a stark comparison to the relatively flat two years prior,² further compounding this market inflection point. With ETFs used increasingly not just as trading tools, but as long-term allocation vehicles, the centre of gravity for ETF growth is clearly becoming increasingly global.

Once primarily associated with passive beta and liquidity management, ETFs are now increasingly being used to express active views, manage risk dynamically and deliver more targeted outcomes.

As we look ahead to 2026, the global ETF market is no longer defined by whether the structure works, but by how it is being used, where growth is coming from and how far the wrapper itself can evolve. These themes form the foundation of my three predictions for the year ahead.

Prediction 1: ETFs become the default launch vehicle for asset managers

By 2026, we believe the ETF wrapper will likely no longer be viewed as just as an alternative vehicle—it could be a primary starting point—especially for strategies designed for broad distribution and portfolio use.

Across the industry, asset managers are increasingly designing strategies with the ETF structure in mind from inception. At the end of 2025, ETFs represented 37% of total fund assets, compared to 26% four years prior.³ In many cases, mutual funds are becoming secondary expressions rather than the primary vehicle of choice. Two forces are accelerating this shift: distribution is increasingly platform-led, and portfolio implementation is increasingly model- and outcome-oriented, both of which favour ETF delivery. This is evident in the fund launch data. ETF fund launches grew 53% in 2025 from the year prior as mutual funds launches concurrently declined.⁴

This shift has not been driven by fees alone. What we are hearing is that it reflects a broader recognition of ETFs as better-aligned with how investors construct and manage portfolios today—with preference for transparency, liquidity and flexibility as well as reduced unnecessary friction. For investors, this means greater precision in deploying capital and maintaining exposure over time.

Asking “Should this strategy be an ETF?” now feels outdated. The more relevant question should be “What structure best serves the end investor?” Increasingly, we believe the answer will likely be the ETF wrapper.

Prediction 2: Active ETFs move from innovation to execution

Active ETFs are entering a critical phase of their development—execution. The past few years have demonstrated that active strategies can exist within an ETF structure. The focus now shifts to scale, consistency and the ways in which these products behave across different market environments as the next wave of adoption should depend less on product novelty and more on repeatable delivery.

Key considerations include:

• Portfolio construction under daily transparency
• Liquidity dynamics as assets grow
• Trading behaviour across both calm and stressed markets
• Capacity, intellectual property protection and how managers prevent strategy effectiveness from eroding under daily transparency

The ETF wrapper won’t suit every active strategy. However, for those that work well, the appeal is clear. This is evident in the data for active strategies, since 2020 assets in active ETFs has grown from US$255 billion to US$1.3 trillion. While assets housed in active mutual funds dwarf that of their ETF counterparts, they have experienced slow relative growth, growing from US$13.1 trillion in 2020 to US$14.7 trillion⁵. Active ETFs offer a compelling balance between flexibility and discipline, allowing managers to express conviction while investors retain the structural benefits of the ETF vehicle. In our opinion, the winners will be those that can pair clear, persistent alpha hypotheses with robust implementation and trading design.

Prediction 3: Asia and Latin America drive the next phase of ETF growth

The next major leg of global ETF growth will likely be led by Asia and Latin America.
After years of steady development, these regions are entering a powerful alignment of factors: expanding domestic investor bases, improving market infrastructure and increasing demand for simple, transparent investment vehicles. As local markets deepen and access improves, ETFs become a natural “first-choice” tool for diversified exposure.

Importantly, ETF usage in these markets is evolving. ETFs are increasingly being used for long-term investing and asset allocation, rather than purely tactical trading. This shift plays directly to the strengths of the ETF structure. In other words, it’s not just growth in assets—it’s growth in purpose.

By 2026, Asia and Latin America will likely no longer be viewed as peripheral growth stories, but as central contributors to global ETF assets and innovation.

Final thought

The ETF industry has moved well beyond proving its relevance. Today, the conversation is about depth, sophistication and occupying a long-term role within portfolios.

As we head into 2026, ETFs are not just growing in size, they are growing in purpose. In our opinion, those who understand how the wrapper is evolving, where adoption is accelerating and how active strategies are being integrated should be best positioned for the next chapter of global ETF growth.