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Global ETFs are no longer functioning as solely investment products, after record growth last year cemented its position as a “backbone” of portfolios and the use of active strategies gained popularity.
The global exchange traded funds (ETF) market jumped 32.8 per cent last year from $14.8 trillion to $19.8 trillion according to the latest findings from financial services firm State Street, after ETF use expanded across both institutional and retail channels.
The expansion came as ETFs managers broaden their access to other asset classes and strategies, after previously being limited to private wealth and hedge funds, leading to a wave of new entrants and launches.
A record 2,795 ETFs listed globally in 2025, 997 more than last year, while inflows rose 26 per cent to $2.4 trillion.
Shifting to active ETFs
Meanwhile, a shift to active ETFs also buoyed the market, becoming a “centre of gravity for growth,” as inflows to active strategies jumped 70 per cent.
The product had struggled to gain interest after years of active management dominating the landscape, with investors preferring to beat the market rather than track it, and people being turned off by high fees and trade commissions.
The report uncovered that investors pursued active strategies in a bid to adjust and deal with volatile interest rates caused by ongoing macroeconomic uncertainty.
Joerg Ambrosius, president of Investment Services at State Street, said: “ETF growth has reached a point where scale changes the conversation.”
“The market is still expanding, but success increasingly depends on whether firms can operate at scale, manage complexity and execute consistently as ETFs take on a larger role in the financial system.”
Regional trends
North America remained the leading market for ETF growth, marking the second consecutive year of inflows exceeding $1 trillion, while Canada recorded a market first of $100bn in annual inflows.
Both markets saw usage expand as investors and advisers increasingly relied on the product for liquidity, while in the US active ETFs, 84 per cent of launches were active.
Europe also saw record inflows in active strategies, surpassing $38bn and outpaced passive strategy launches.
The number of European ETF investors also jumped to 32.8m from 19.2m in 2022, a 69 per cent increase, reflecting the region’s growing popularity for investors and widening consumer base.
The Asia Pacific region saw assets under management (AUM) surpass $2 trillion, with China knocking Japan off the top spot as the largest market with over $850bn in AUM, bolstered by improved policy support for foreign investor access.
The Australian market also reported rapid scale, with total assets hitting $320bn, a 33.3 per cent increase from the prior year, while South Korea and Taiwan also saw a boost in retail participation.
2026 outlook
State Street anticipates further growth in 2026, as more investors allocate capital into active management, particularly in fixed income and derivatives-based strategies, particularly in the US.
The firm anticipates 85 per cent of all new ETF launches in the region to be active and attract $750bn in inflows, doubling the amount recorded in 2025.
In Europe average retail ownership is projected to grow from 25 per cent to at least 30 per cent, while China is expected to maintain its role as the largest ETF market in the APAC region.