Capital inflows, issuance numbers and trading volumes all hit record highs - ETFs continue to sweep the U.S. market

### Source: Wall Street CN

The U.S. ETF industry has set an unprecedented triple record in 2025, with capital inflows, the number of new product launches, and trading volume all hitting all-time highs. This trillion-dollar capital surge is propelling the $13 trillion U.S. ETF market into a brand-new stage of development.

On Wednesday, Bloomberg data showed that U.S.-listed ETFs have attracted $1.4 trillion in capital inflows so far this year, surpassing the annual inflow record set last year. Meanwhile, more than 1,000 new products have entered the market, also a new historical high. Trading volume in the ETF market has similarly set a new annual record.

This "perfect performance" has sparked market concerns about the sustainability of the ETF boom. Eric Balchunas, a senior ETF analyst at Bloomberg Intelligence, stated that given the overly flawless performance of ETFs this year, investors should prepare for potential market adjustments next year.

The last time all three metrics set records simultaneously was in 2021, followed by a sharp decline in risky assets the next year, with the S&P 500 plummeting 19%.

### Trillion-Dollar Capital Drives Industry Explosive Growth

According to Bloomberg Intelligence data, U.S.-listed ETFs have been attracting new capital at a rate of approximately $5 billion per day this year, with low-cost index-tracking funds absorbing the majority of the inflows. Actively managed products have continued to expand their market share, accounting for more than 30% of total industry capital inflows and about 84% of newly launched products.

The S&P 500’s third consecutive year of double-digit gains has boosted ETF growth, although the benchmark index has traded roughly sideways since October, weighed down by Wall Street’s skepticism about tech giants’ massive capital expenditures in artificial intelligence and uncertainties surrounding the Federal Reserve’s future interest rate cut plans.

Todd Sohn, a senior ETF strategist at Strategas, predicted that while another "triple crown" (simultaneous records in inflows, launches, and volume) may not be achieved in the next few years, capital inflows and trading volume will continue to set records. He believes the number of launches is the trickiest component, as it is more dependent on market cycles—more severe stock market conditions may mean reduced product activity.

### Boom in Leveraged Single-Stock ETFs Hides Risks

Leveraged single-stock ETFs have experienced explosive growth over the past few years, with options-based funds accounting for 40% of this year’s launches. Despite their inherent volatility drag, which tends to erode long-term performance, retail investors have flocked to these high-risk products.

Cracks have emerged in the single-stock ETF space in 2025. AMD’s stock price surged sharply in October, leading to the termination of the GraniteShares 3x Short AMD exchange-traded product listed in Europe, which aimed to deliver three times the inverse performance of the stock. While the U.S. currently only allows 2x leverage for single-stock funds, particularly volatile market conditions could similarly test these products.

Roxanna Islam of TMX VettaFi said that any setbacks will not stop the overall trend but only slow its pace. She believes the industry will likely mature enough in the next few years for growth rates to slow and stabilize, but innovation will continue regardless of net inflows.

### Dual Share Classes Become a Market Variable

A potential variable for the ETF industry next year is the launch of dual share classes. The U.S. Securities and Exchange Commission has approved dozens of asset management companies, including Dimensional Fund Advisors, BlackRock, and Fidelity, to allow ETFs to be offered as a share class of existing mutual funds. This fund structure could theoretically map the tax advantages of ETFs to trillions of dollars in mutual fund assets.

While this could lead to a wave of new listings and inflows, the introduction of multiple share classes has raised numerous concerns. A J.P. Morgan report in May argued that launching a successful ETF strategy "is not as simple as adding a share class to an existing mutual fund and expecting it to attract assets". RBC Capital Markets warned that a flood of new funds could strain market makers with "limited" resources.

Balchunas noted that investors in ETF share classes may feel pressure from mutual fund "tax contagion." In the event of large-scale outflows, all fund share classes will face the impact of capital gains distributions. He compared the ETF industry to "a tent being pushed from all sides"—the more pushes, the greater the likelihood of tearing.

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