Q1 2025 was another quarter with strong inflows for the U.S. ETF industry.
These inflows occurred in a volatile and negative market environment in which investors witnessed the peak of the U.S. stock markets in mid-February. While economic fears—especially around the possible tariffs in the U.S.—increased, investors around the globe acted nervous over any political and economic news. Investor sentiment was impacted by the growth expectations for future technologies such as artificial intelligence after the launch of DeepSeek in China and obviously by the discussions of the impacts of possible tariffs initiated by the U.S. president and potential tit-for-tat reactions from the markets which are the targets of the new tariffs. That said, the tariffs are seen as a kind of trade war between the U.S. and the rest of the world, especially China, by some market observers.
When it comes to this, investors were concerned about a political shift to the right as a result of the general election in Germany in March. Since these concerns did not materialize, German equities started a relief rally, as a possible great coalition seems to be in the favor of investors.
Meanwhile, central banks around the globe adjusted their policies to the current environment by cutting interest rates. These decisions reflect central banks’ efforts to navigate economic challenges, including trade tensions, inflationary trends, and the high market volatility, to support their local economies. With regard to this, it is remarkable that the U.S. Federal Reserve didn’t take any action, as the Fed did not see any need for lower interest rates since economic indicators and inflation numbers for the U.S. were in line with expectations.
Nevertheless, fears of increasing debt in the U.S. and other major economies—which may lead to increasing interest rates—might be the driver for the relatively weak inflows into bond ETFs, while the still somewhat inverted yield curves might be the drivers for the inflows into money market ETFs.
That said, inverted yield curves and especially long-term inverted yield curves are seen as an early indicator for a possible recession. However, there is only a very limited number of indicators which are sending negative signals for economic growth in the U.S. and other major economies. When it comes to this, it is noteworthy that most of these negative indicators are being offset by positive signals from other indicators. But even as it looks like the yield curves are slowly normalizing, this does not mean that there is no recession possible in the major economies around the globe. This is especially true as some major economies, such as Germany, lack economic growth and may need lower interest rates as stimulus. Despite these headwinds, the positive effects of lower interest rates seem to be more important for investors than the current state of some economies.
Assets Under Management in the U.S. ETF Industry
From an ETF industry perspective, the performance of the underlying markets led, in combination with the estimated net flows, to increasing assets under management (from $10,373.3 bn as of December 31, 2024, to $10,431.1 bn at the end of March 2025). At a closer look, the increase in assets under management of $57.7 bn for Q1 2025 was driven by the estimated net inflows (+$307.8 bn), while the performance of the underlying markets contributed (-$250.1 bn) to the assets under management.
Graph 1: Assets Under Management in the U.S. ETF Industry, January 1, 2000 – March 31, 2025 (USD billions)
Source: LSEG Lipper
As for the overall structure of the U.S. ETF industry, it was not surprising equity ETFs ($8,145.5 bn) held the majority of assets, followed by bond ETFs ($1,916.5 bn), commodities ETFs ($203.2 bn), alternatives ETFs ($137.8 bn), mixed-assets ETFs ($27.9 bn), and money market ETFs ($0.2 bn).
Graph 2: Market Share, Assets Under Management in the U.S. ETF Industry by Asset Type, March 31, 2025
Source: LSEG Lipper
ETF Flows by Asset Type
The U.S. ETF industry enjoyed estimated net inflows (+$307.8 bn) over the course of the first quarter 2025.
The inflows in the U.S. ETF industry for Q1 2025 were driven by equity ETFs (+$184.7 bn), followed by bond ETFs (+$104.1 bn), commodities ETFs (+$13.3 bn), alternatives ETFs (+$4.4 bn), mixed-assets ETFs (+$1.1 bn), and money market ETFs (+$0.2 bn).
Graph 3: Estimated Net Sales by Asset Type, January 1, 2025 – March 31, 2025 (USD billions)
Source: LSEG Lipper
As graph 4 depicts, equity and bond ETFs both enjoyed inflows in each of the three months of the first quarter of 2025. Nevertheless, the graph does also show that the flows in both asset types have slowed down in March.
Graph 4: Monthly Estimated Net Sales by Asset Type, January 1, 2025 – March 31, 2025 (USD billions)
Source: LSEG Lipper
This trend for the estimated net flows is not surprising given the uncertainty of the markets with regard to a possible new tariffs regime which will be introduced at the beginning of April. That said, it is still too early to make an assumption about the future fund flow trends in the U.S. ETF industry.
Assets Under Management by Lipper Global Classifications
In order to examine the U.S. ETF markets in further detail, a review of the Lipper global classifications will lead to more insights on the structure and concentration of assets within the U.S. ETF industry. At the end of March 2025, the U.S. ETF market was split into 140 different classifications. The highest assets under management at the end of March were held by funds classified as Equity U.S. ($4,354.6 bn), followed by Equity U.S. Small & Mid-Cap ($823.6 bn), Equity Global ex U.S. ($774.0 bn), Bond USD Medium Term ($492.6 bn), and Equity U.S. Income (400.9 bn). These five peer groups accounted for 65.63% of the overall assets under management in the U.S. ETF segment, while the 10-top classifications by assets under management accounted for 76.95%.
Overall, only 15 of the 140 classifications each accounted for more than 1% of assets under management. In total, these 15 classifications accounted for $8,740.5 bn, or 83.79%, of the overall assets under management.
In addition, these numbers show that U.S. investors have a strong home bias when it comes to their investments.
Graph 5: Ten-Top Lipper Global Classifications by Assets Under Management, March 31, 2025 (USD Billions)
Source: LSEG Lipper
The peer groups on the other side of the table showed some funds in the U.S. ETF market are quite low in assets and their constituents risk being closed in the near future. They are obviously lacking investor interest and might, therefore, not be profitable for their respective fund promoters.
Graph 6: Ten Smallest Lipper Global Classifications by Assets Under Management, March 31, 2025 (USD Billions)
Source: LSEG Lipper
Estimated Net Flows by Lipper Global Classifications
The net inflows of the 10 Lipper global classifications with the highest estimated net inflows over the course of Q1 2025 accounted for $244.6 bn. In line with the overall sales trend for Q1 2025, equity peer groups (+$141.2 bn) gathered the majority of flows by asset type on the table of the 10 Lipper global classifications with the highest estimated net inflows. Given the overall fund flow trend in the U.S. ETF industry, it was not surprising that Equity U.S. (+$115.3 bn) was the best-selling Lipper global classification for Q1 2025. It was followed by Bond USD Government Short Term (+$22.5 bn) and Alternative Other (+$20.3 bn).
These numbers showed the U.S. ETF segment is also highly concentrated when it comes to fund flows by sector. Generally speaking, one would expect the flows into ETFs to be concentrated since investors often use ETFs to implement their market views and short-term asset allocation decisions. These products are made and, therefore, are easy to use for these purposes.
Graph 7: The Ten Lipper Global Classifications with the Highest Subscriptions and Redemptions, Q1 2025 (USD Billions)
Source: LSEG Lipper
On the other side of the table, the 10 peer groups with the highest estimated net outflows for March accounted for $15.6 bn in outflows.
Equity Theme – Natural Resources (-$4.7 bn) was the Lipper Global Classification with the highest outflows for Q1 2025. The category was bettered by Equity Sector Gold & Precious Metals (-$2.2 bn) and Equity Sector Healthcare (-$2.0 bn).
Assets Under Management by Promoters
A closer look at assets under management by promoters in the U.S. ETF industry also showed high concentration, with only 93 of the 385 ETF promoters in the U.S. holding assets at or above $1.0 bn (accounting for $10,378.0 bn overall). iShares ($3,188.7 bn), the largest ETF promoter in the U.S. accounted for 30.57% of the overall assets under management, ahead of the number-two promoter—Vanguard ($3,001.7 bn)—and the number-three promoter—SPDR ($1,476.4 bn).
Graph 8: Ten-Top ETF Promoters by Assets Under Management, March 31, 2025 (USD Billions)
Source: LSEG Lipper
The 10-top promoters accounted for 90.49% of the overall assets under management in the U.S. ETF industry. This meant, in turn, the other 375 fund promoters registering at least one ETF for sale in the U.S. accounted for only 9.51% of the overall assets under management.
ETF Flows by Promoters
Since the U.S. ETF market is highly concentrated with regard to the assets under management by promoter, it was not surprising that nine of the 10 largest promoters by assets under management were among the 10-top selling ETF promoters for Q1 2025. Vanguard was the best-selling ETF promoter in the U.S. for March (+$88.6 bn), ahead of iShares (+$68.6 bn) and JPMorgan (+$17.6 bn).
Graph 9: Ten Best-Selling ETF Promoters, Q1 2025 (USD Billions)
Source: LSEG Lipper
The flows of the 10-top promoters accounted for estimated net inflows of $239.5 bn. As for the overall flow trend in Q1 2025, it was clear that some of the 385 promoters (89) faced estimated net outflows (-$8.8 bn in total) over the course of the quarter.
Assets Under Management by ETFs
There were 4,152 instruments (4,083 primary share classes/ETF portfolios and 69 convenience share classes) listed as ETFs registered for sales in the U.S. in the Lipper database at the end of March. Regarding the overall market pattern, it was not surprising assets under management at the ETF level were also highly concentrated. Only 752 of the 4,083 ETF portfolios held assets above €1.0 bn each. These ETFs accounted for $9,896.4 bn, or 94.87%, of the overall assets in the U.S. ETF industry. The 10 largest ETFs in the U.S. accounted for $3,164.9 bn, or 30.34%, of the overall assets under management.
Graph 10: Ten Largest ETFs by Assets Under Management, March 31, 2025 (USD Billions)
Source: LSEG Lipper
Estimated Net Flows by ETFs
A total of 2,436 of the 4,089 primary share classes analyzed in this report showed net inflows of more than €10,000 each for Q1 2025, accounting for inflows of $425.2 bn. This meant the other 1,653 instruments faced no flows or net outflows for the quarter. (When looking at these numbers one needs to bear in mind that some ETFs do not report their assets under management. This means Lipper can’t calculate fund flows for these ETFs). Upon closer inspection, only 528 of the 2,436 ETFs posting net inflows enjoyed inflows of more than $100 m during Q1 2025—for a total of $389.1 bn. The best-selling ETF for Q1 2025 was the Vanguard 500 Index Fund;ETF which enjoyed estimated net inflows of $35.2 bn. It was followed by iShares Core S&P 500 ETF (+$20.9 bn), and Vanguard Total Stock Market Index Fund;ETF (+$9.7 bn).
Graph 11: Ten Best-Selling ETFs, Q1 2025 (USD Billions)
Source: LSEG Lipper
The flow pattern at the fund level indicated there was a lot of turnover and rotation during Q1 2025, but it also showed the concentration of the U.S. ETF industry even better than the statistics at the promoter or classification levels since the 10 best-selling ETFs account for inflows of $108.2 bn.
Given its size and the overall trend for net sales at the promoter level, it was somewhat surprising that only two of the 10 best-selling funds for Q1 2025 were promoted by iShares. These iShares ETFs accounted for estimated net inflows of $30.6 bn. Nevertheless, this shows that the competition in U.S. ETF industry allows also other promoters to join the list of the 10 best-selling ETFs in the U.S..
This article is for information purposes only and does not constitute any investment advice.
The views expressed are the views of the author, not necessarily those of LSEG
