The 2,837 U.S.-listed ETFs at the end of 2021 reflect a wide variety of strategies, from factor-based ETFs to funds that consider environmental, social, and governance criteria to finely tuned thematic approaches, such as technology-focused strategies. Even actively managed ETFs are increasingly part of the ETF ecosystem, though investors have not fully embraced them.
But inflows are mostly going into low-cost, indexed, core exposures. In 2021, 40% of the flows into U.S.-domiciled ETFs went to funds tracking the Standard & Poor’s 500 Index or total market indexes. In other words, the rise of ETFs is closely tied to the rise of indexing.
In addition to U.S.-focused ETFs, investors are using ETFs to explore various pockets of the investment universe. For example, interest in international strategies blossomed in 2021—with inflows rising almost sixfold from 2020 levels, to $165 billion.
Flows last year into bond ETFs—including municipal bond ETFs—were about even with their 2020 inflows, but the accelerating rise of bond ETFs in recent years has become a powerful part of the overall ETF adoption story.