Exchange-Traded Funds (ETFs) are experiencing a significant surge in popularity, attracting cash at a record-breaking pace. US-listed ETFs are projected to top $2 trillion in inflows in 2026, representing a 40% increase over 2025, with over $1 trillion already flowing in during the first half of the year. Globally, ETF assets under management reached a record $23.09 trillion by the end of June 2026. This growth is attributed to factors like lower costs, greater transparency, liquidity, and tax efficiency, making them a preferred investment vehicle for long-term portfolio construction.
Retail adoption is a key driver, with 20 million US households now owning ETFs, up from 3 million in 2010. The median age of ETF investors is 51, and millennials already account for about one-third of ETF-owning households, with Millennials and Gen Z expected to fuel future growth. Cost efficiency, diversification, and flexibility are primary reasons for retail adoption. A substantial 60% of ETF-owning households hold these funds within IRAs, highlighting their use in long-term savings strategies. Financial advisors are also increasing their ETF usage, with allocations rising to about 50% of client assets among fee-based advisers.
Active ETFs are playing an increasingly significant role, taking an oversized share of inflows despite passive funds still dominating total assets. More than 35% of the $2 trillion projected inflow into US-listed ETFs in 2026 is going into actively managed funds. About 88% of all new ETFs launched through June of this year were actively managed, attracting approximately $450 billion in flows. This trend reflects their growing use by institutional investors for portfolio construction and management, with active ETFs now accounting for about 12% of the total $16.1 trillion in US-listed ETF assets under management. Derivative income ETFs, such as JEPI and JEPQ, have seen substantial growth, reaching approximately $180 billion in assets under management.
The expansion of offerings, including thematic ETFs and third-party model portfolios, is further accelerating inflows. Thematic ETFs, like semiconductor ETFs which saw over $19 billion in inflows in June, are attracting significant interest. Third-party model portfolios, utilizing ETFs, have jumped 46% to $950 billion in assets, catering to the growing wealth and advisory segments. This demonstrates how investors are using ETFs for multi-asset strategies, reflecting a sustained shift beyond just passively tracking market indexes. BlackRock's iShares, a major player, leads global ETF industry inflows with a record $310 billion in net inflows in the first half of 2026, bringing their total assets to $6.2 trillion.
