According to Zhitong Financial APP, Exchange-Traded Funds (ETFs) in the USA achieved a record inflow of $1.1 trillion in 2024, but as they move into 2025, the rapid growth of ETFs may face more obstacles. While many believe that ETFs will surpass the record set in 2024, they are cautiously monitoring a series of new challenges, from how to find direction in an increasingly crowded ETF field to the ongoing issue of innovation.

Last year marked the highest inflow of funds in the 35-year history of ETFs, nearly doubling the previous year's $597 billion. Analysts attribute the popularity of these products to factors including the bullish market in the USA, the emergence of innovative Cryptos and options-based products, and investors increasingly preferring low-cost, highly liquid ETFs instead of.Mutual funds。

Morningstar ETF Analyst Bryan Armour stated, "I find myself thinking that new product development may have outpaced investor interest in some of the more complex strategies. Not every product is able to attract investors."

In fact, one of Armour's predictions for 2025 is that the market may see a record number of ETF closures. While asset management companies closed about 186 Funds in 2024, with 91% of the funds having less than $0.25 billion in assets, Armour anticipates that this number will skyrocket next year, surpassing the record of 253 set in 2023.

Armour stated, "There are too many products being developed, and due to a lack of sufficient uniqueness and appeal to attract assets, many ETFs are unable to survive and become profitable."

Cerulli Research shows that 2023 was the first year of decline in the average lifespan of ETFs, with the average lifespan of ETFs dropping below 5 years by early 2024. Cerulli Vice Director Matt Apkarian stated, "Companies realize that they must close funds that cannot attract assets more quickly and redeploy resources."

Nevertheless, industry insiders indicate there are many reasons to be bullish on this industry. According to data from ETFGI, an industry research and consulting firm, as of December 27, the global assets in the industry have surged from $11.6 trillion on December 31, 2023, to $14 trillion.

Matthew Bartolini, the head of Americas research at State Street Global Advisors, stated that as of the last complete week of last year, the number of newly launched ETFs reached 714, including 12 spot Bitcoin products. In comparison, 543 were launched in 2023, and 480 in 2021.

The surge in the number of ETFs can be traced, to some extent, to the increased interest in using options to manage, limit, or even exacerbate risks. The surge of buffered and defined outcome ETFs is among the biggest features of 2024, utilizing options to trade between upside potential and downside risk, or to achieve target returns.

Brendan McCarthy, the global head of ETF distribution and capital markets at Goldman Sachs Asset Management, stated, "We will enter this market with a buffered ETF product in the first quarter of 2025."

The GraniteShares 2x Long NVIDIA ETF, established two years ago, offers investors twice the daily return of NVIDIA (NVDA.US). It increased by 177% in 2024, attracting over $3.5 billion in new assets, bringing total assets close to $6 billion.

"There is no reason to believe that $1 trillion is not the new norm for inflow," stated David Mann, the global head of ETF products and capital markets at Franklin Templeton. This also marks his 22nd year of developing new exchange-traded funds. "This is a one-way train ride, and the train is now on the express."