Record ETF and SMA sales as active ETFs and custom index shine

Year-end data confirms explosive growth in active ETFs — with net sales almost equal to the previous three years combined. SMAs also prospered, seeing more net sales in 2024 than the previous two years combined. While active ETF demand remains concentrated, the data points to new opportunities in the space, particularly with registered investment advisors (RIAs).

Custom index drove United States equity SMA sales across 2024, accounting for 25% of wirehouse SMA net sales ($22 billion). Taxable fixed income also performed robustly, with strong sales across all three wrappers. 

Accelerating Growth in ETF and SMA Sales but Mutual Fund Outflows Slow

Record ETF inflows for 2024 were the highest since 2021 at $113 billion. Active ETFs accounted for 22% of 2024 ETF net sales while making up only 6% of ETF assets under management (AUM) at year-end. Net sales of active ETFs also outstripped the previous two and a half years combined. SMAs experienced a similar acceleration in growth with net sales amounting to $86 billion, which is greater than the last two years combined. 

Much like in 2023, ETFs and SMAs each took share from mutual funds across wirehouse programs in 2024. Outflows from mutual funds slowed significantly year-on-year, however — to $16 billion compared with $50 billion the previous year. The few bright spots for mutual funds were around taxable fixed income and small-cap equity funds.

Figure 1: % of Fee Based Netflows by Asset Class - 2024 Wirehouse channel ($151B)

_{Source: BNY Growth Dynamics. Trend data as of December 31, 2024.}

Rep-as-Portfolio Managers (PMs) Spur Active ETF Growth as Sales Concentration Falls

Active ETF net flows for 2024 of 24.6 billion fell just short of the combined $25.9 billion for the prior 3 years combined. Rep-as-PM programs were a major driver of the uptick, seeing a 183% increase in active ETF net sales at wirehouses, which is more than double the 89% jump for total ETF net sales.

Among RIAs on BNY Pershing’s platform, active ETF net sales rose by 44% while total ETF net sales grew by 6%. The flow concentration of active ETFs has began to decline somewhat. While 39 active ETFs accounted for 80% of Rep-as-PM net sales, 63 different products accounted for 80% of RIA net sales. From an issuer standpoint, the five issuers captured 80% of Rep-as-PM flows in the wirehouses versus ten issuers for the same proportion of RIA flows. Overall, the top ten issuers represented 81% of AUM in Q4 2024, down from 93% in Q4 2021.

Figure 2: Wirehouse - Active ETF Net Flows

_{Source: BNY Growth Dynamics. Trend data as of December 31, 2024.}

SMAs: Custom Index and Taxable Fixed Income Hit New Heights

AUM in wirehouse third-party managed accounts reached $921 billion, with 59% of that amount in equity SMAs and 26% in fixed-income SMAs. Custom index SMA was a frontrunner in 2024, accounting for 28% of SMA net sales while representing just 9% of SMA assets at the end of Q4 2024. Consistently strong demand also saw custom index make up 68% of U.S. equity SMA net sales. 

Taxable fixed-income SMA fared well, with 2024 sales totaling $16 billion surpassing the previous two years combined. Taxable fixed-income SMA made up 10% of year-end SMA assets but 19% of the year’s net sales.

Figure 3: 3^rd Party Managed Account Net Sales 

_{Source: BNY Growth Dynamics. Trend data as of December 31, 2024.}

Figure 4: Wirehouse 3rd Party Managed Account AUM ($921B)

_{Source: BNY Growth Dynamics. Trend data as of December 31, 2024.}

Likewise, taxable fixed-income active ETFs ($10 billion) also saw more net sales in 2024 than in the previous two years combined. The data also reveals a year-on-year uptick for taxable fixed-income mutual funds with net sales of $18 billion in 2024. 

As growth continues to expand, advisors are turning to products that offer tax efficiency and flexibility. Staying informed with the latest data is crucial to identifying emerging opportunities that can enhance a firm's ability to meet its growth objectives. 

For more information please reach out to the BNY Growth Dynamics team.

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