A $50 Trillion ETF Market? BofA Says It Could Happen Next Decade

(Bloomberg) -- The booming exchange-traded fund industry could become 10 times bigger in the next decade and top $50 trillion, according to Bank of America Corp.

Just to put things in perspective, that would be more than twice the current size of the U.S. economy. Total assets for ETFs listed in the country have grown an average 25% annually in the past 10 years to $4.3 trillion, according to a research note from BofA. At this rate, the bank projects an extra $1 trillion increase next year alone.

Passive strategies such as ETFs are benefitting as investors bail on active managers after years of underperformance. One of the major drivers of strong growth is the “increased awareness” of advantages including tax efficiency, low cost, liquidity and transparency, BofA said. Stable interest rates, expectations for positive equity returns, and tight credit spreads could also act as a bolster next year, according to the bank.

BofA’s $50 trillion call is one of the highest projections for the growth trajectory of ETFs, although the time frame spans five more years than other estimates. Jim Ross, one of the founders of the industry, said last year that assets could reach $25 trillion globally by the end of 2025. State Street Corp.’s Matteo Andreetto had an even lower prediction -- $15 trillion for that same year -- when he worked as the chief executive officer of Deutsche Boerse AG’s Stoxx Ltd. in 2018.

To contact the reporter on this story: Sarah Ponczek in New York at sponczek2@bloomberg.net

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Rita Nazareth, Rachel Evans

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