2025 ULTUMUS ETF Outlook: Active ETFs, AI and Data Standardisation
Asset Growth: Active ETFs, AI and Bonds
Some 50% of respondents expect active ETFs will see the most growth. This continues an existing trend driven by both mutual fund conversions and fresh active ETF launches. Some managers are also launching active ETFs and mutual funds in parallel running the same strategy.
Unsurprisingly the second biggest asset growth trend is Artificial Intelligence, selected by 28% of voters. Both thematic ETFs including AI in their name and broader technology ETFs have capitalized on the stellar share price performance of companies powering the AI revolution - and this shows no signs of abating.
More conservatively, the third largest asset growth trend chosen by 21% of voters, is simply fixed maturity bonds. With government, corporate and mortgage bonds all now yielding more than inflation in the US and many other developed markets, some investors may find that fixed income adequately meets their return targets. Our monthly flow report often identifies bond ETFs as winning some of the biggest inflows in Europe even if equities predominate in the US.
AI for portfolio managers, traders and investors
Investing in AI companies is only the most obvious way that AI affects ETFs. Some 57% of our network also see scope to use AI for fund and portfolio optimization processes, by for instance enhancing portfolio construction and risk management. Around 28% of voters think AI algorithms can enhance trading: through getting better execution and reducing transaction costs. And 14% of our voters think AI can also help investors to select funds.
Technology
Away from the glamourous investing and stock-picking, in the back and middle office, technology is increasingly helping to automate, streamline, coordinate and harmonize ETF operations.
Two thirds of respondents simply identify standardized data solutions as having the biggest impact on ETF operations and one third opt for cloud computing, which is enabling more flexible and scalable solutions. Nobody is yet selecting blockchain technology, though this is a longer trend we will be watching anyway.
Lukewarm on ESG
ESG investing has gone in and out of fashion at different times in recent years as its periods of outperformance have not always been consistently repeated over time - and fees on ESG products can be higher.
Only 11% of our respondents expect that ESG investing will become more prevalent, another 11% see no change in adoption and the great majority – some 77% - expect ESG assets will actually lose market share.
US politics
The new Trump administration is certainly controversial and there are very high hopes that Trump will give a huge boost to cryptocurrencies, beyond his eponymous coin that produced spectacular performance the weekend before his inauguration. However, the jury is still out as far as our followers are concerned. They do not seem confident enough to predict that US politics will generate either a boost to innovation or minimal impact - and instead take the view that it is too soon to tell.
