Exchange-traded funds (ETF) have long been known as a simple and low-cost way to invest in a market index. However, that is changing quickly.
New data from Goldman Sachs Global Banking & Markets shows that ETFs are becoming a much more advanced and widely used investment tool. At the same time, record amounts of money are flowing into them.
In the first half of 2026 alone, investors put more than $1 trillion into US-listed ETFs. At the current pace, total inflows for the full year could cross $2 trillion. It would be an all-time high and a 40% increase from 2025, according to Goldman Sachs. This is also part of a much bigger global trend.
PwC’s eighth annual ETF survey, “ETFs 2026: The Next Big Leap”, found that the global ETF industry is heading for major growth. The survey included senior executives who together manage more than 80% of global ETF assets. PwC expects total global ETF assets to exceed $20 trillion by 2026.
ETF wrapper no longer just for passive investing
For many years, ETFs were mainly linked to passive investing. Most simply tracked as an index. That is no longer the case, says Tom Campbell, head of Americas ETF distribution at Goldman Sachs Global Banking & Markets.
“We’re now seeing some of the most advanced active management strategies in the markets expressed within the ETF wrapper,” Campbell says in the Goldman Sachs report. “These range from levered funds to innovative fixed income offerings to structured derivatives,” he adds.
Active ETFs are a major part of this change. More than 35% of ETF inflows this year are going into actively managed funds. However, active strategies still make up only about 13% of the $16.1 trillion invested in US-listed ETFs.
Institutions are increasingly using active ETFs to try to beat market benchmarks and rebalance their portfolios.
“Active is really driving a lot of growth in the ETF market, and it’s definitely noticeable on the trading desk,” says Jackson Isaacs, Managing Director, ETF Trading at Goldman Sachs.
PwC’s global data supports this trend. Active ETF assets worldwide grew six-fold between 2014 and September 2021, reaching $405 billion. Growth has continued to accelerate since then.
However, the growth of active ETFs depends heavily on local regulations. Different countries have different rules on how often ETF managers must disclose their holdings. This has had a major impact on the active ETF market.
Canada does not require daily disclosure of ETF holdings. As a result, active strategies account for more than 20% of the country’s ETF assets.
The US eased its disclosure rules in 2019, helping active ETF assets grow quickly. Europe still requires full daily disclosure. Because of this, active ETFs remain a small part of the market. However, PwC found that half of the European managers surveyed would launch non-transparent active ETFs if the rules were relaxed.
New ETF products are flooding the market
Another reason behind the record inflows is the huge number of new ETFs entering the market. According to Goldman Sachs, more than 1,100 new ETFs launched last year. 2026 is on track to beat that number.
The US could end the year with more than 6,000 listed ETFs. That would mean there are more ETFs trading in the US than individual stocks. “There is this yearning from investors to get more customization in their portfolios,” Isaacs says in the Goldman Sachs report. “So we have seen this influx of new products from issuers which are, quite frankly, seeing what sticks.”
ETF issuers are racing to launch products based on new investment themes. Both retail investors and large institutions are quickly adopting these products. At the same time, older and more established ETFs are also attracting strong inflows. Higher trading volumes, better liquidity during the trading day, transparency and tax efficiency continue to make ETFs attractive to investors.
Thematic bets and multi-asset portfolios are growing
Thematic ETFs focus on a specific investment idea. For example, an ETF may focus on South Korean stocks or companies that make memory chips.
These products have been around for years. What is changing is how quickly investors are adopting them.
Investors like thematic ETFs because they are easy to trade and give them exposure to a specific theme without having to choose individual stocks.
Large institutional investors, including pension funds, are also using baskets of ETFs to build broader portfolios with different types of assets.
Campbell says this trend is growing quickly. The demand for more customised portfolios is also changing the wealth management business.
Assets held in third-party model portfolios, which are ready-made portfolios built using ETFs, have jumped 46% over the past year to $950 billion.
Wealth managers, registered investment advisers and investment firms are increasingly using these portfolios instead of building portfolios entirely around individual securities.
“Rebalancing these portfolios is becoming an increasingly large part of trading activity,” Isaacs says. “This is a dynamic we are watching with an eye on providing liquidity solutions as these model portfolios grow.”
ETFs are riding the AI wave in both directions
The AI trade has had a major impact on ETF flows this year. Semiconductor ETFs attracted more than $19 billion in June, their biggest monthly inflow on record. Software ETFs, however, saw the opposite trend. They lost around $1.9 billion during the same month, one of their biggest monthly outflows since 2018.
“This shows how investors are using ETFs to manage and smooth volatility and lean on authorized participants to scale liquidity across their portfolios,” Isaacs says.
Overall ETF trading volumes are running 50% higher than in 2025, which was already a record year. Campbell says the ETF industry now sees around $320 billion in notional trading volume every day.
During periods of market stress, ETFs can account for as much as 40% of all trading activity. “Investors are continually leaning into ETFs,” he says, particularly for hedging and rebalancing when volatility rises.
The next five years could be even bigger
PwC’s survey shows that the growth of ETFs is not limited to the US. Global ETF assets have grown by nearly 22% a year since 2005. Assets nearly tripled from $3.3 trillion in 2016 to more than $10 trillion by November 2021.
Looking ahead to 2026, PwC expects growth to continue
More than half of the executives surveyed believe global ETF assets will reach at least $18 trillion. PwC’s own projection, based on stronger historical growth rates, puts the figure at more than $20 trillion. The US is expected to remain the world’s largest ETF market.
Most executives surveyed expect US ETF assets to double to around $13 trillion by 2026. Europe’s ETF market is expected to reach around $3 trillion. Growth there could be supported by the strong global reputation of its UCITS fund structure. Canada, the smallest market included in the survey, is also expected to grow quickly. All respondents expect Canadian ETF assets to at least double to $500 billion. Some believe the market could reach $1 trillion.
Asia-Pacific has recorded the fastest growth of any region. Its ETF market has nearly tripled since 2016. Managers expect ETF assets in the region to reach between $2 trillion and $3 trillion by 2026. ESG, digital platforms and crypto are also changing the ETF industry. PwC’s survey identified several other trends that could shape the ETF market in the coming years.
Sustainable investing is one of them
Nearly half of executives globally expect more than half of their new ETF launches to focus on ESG investing. Europe is leading this trend, with more than 80% of executives expecting strong ESG-focused launches. Strict new EU disclosure rules are helping drive this growth.
The US is much lower at 28%, showing a less developed ESG regulatory framework. The way ETFs are sold is also changing. Globally, 84% of executives expect strong demand from online and digital platforms over the next two to three years. This trend is being driven partly by younger investors who prefer digital investing platforms. In North America, traditional financial advisers continue to play an important role alongside online platforms. In Europe, private banks and online platforms are the main distribution channels.
Crypto ETFs remain another important area, but their growth depends heavily on regulations. Canada launched the world’s first physically backed Bitcoin and Ethereum ETFs in 2021. It also has the highest number of managers planning to launch new crypto products. US managers have been more cautious because of regulatory hurdles. Managers in Europe and Asia have shown stronger interest in launching crypto ETFs in the coming years.
ETFs are becoming a major tool for building portfolios
The ETF industry is changing quickly.Record inflows into US-listed ETFs are coming alongside a growing number of active, thematic and multi-asset products. ETFs are no longer simply a low-cost way to track a market index.
They are increasingly becoming one of the main tools investors use to build, manage, rebalance and protect their portfolios. Goldman Sachs’ data shows this change happening in real time in 2026. As Campbell says, growth in the space “is expanding at a rapid pace,” and most of the industry expects that pace to continue well past this year.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a registered financial advisor in the respective jurisdiction.