Why ETFs have become one of the fastest-growing investment products

Cost, access, simplicity: The ETF value proposition

ETFs have succeeded because they solved three problems at once: cost, access, and simplicity. Compared to traditional managed funds, ETFs typically carry lower management fees. They also trade on the ASX like a share, so investors get intraday pricing and liquidity. As a result, diversified, professionally constructed portfolios are now accessible to everyday investors. Previously, that kind of access was the preserve of institutions or high-net-worth clients.

For investors who want broad market exposure, ETFs offer a compelling starting point. In addition, for those already working with an adviser, they provide an efficient and transparent building block. This means they fit neatly into a broader financial plan without adding unnecessary complexity.

From niche to mainstream: The growth numbers

ETFs started as a niche index-tracking product in the early 1990s. Since then, they have grown into a multi-trillion-dollar global industry. Australia has mirrored that trajectory closely. In fact, the local market has recorded strong double-digit growth in ETF assets under management over the past decade.

Importantly, this isn’t just retail enthusiasm. Superannuation funds, financial advisers, and institutional investors have all increased their ETF allocations. Many use them as core building blocks within broader portfolios. Others use them as tactical satellite exposures. Either way, the scale of adoption is striking.

Why advisers and investors are both voting with their feet

The shift toward ETFs reflects a broader change in portfolio construction thinking. Both advisers and self-directed investors are moving away from picking individual stocks. They are also moving away from relying solely on active managers. Instead, they are building diversified, cost-efficient portfolios using transparent, rules-based structures.

For your adviser, ETFs make it easier to help you reach your goals. Specifically, they support strategic asset allocation and broader financial planning, rather than security selection alone. That said, this shift isn’t about abandoning active management entirely. Rather, it’s about being intentional with where active decisions are made. Low-cost, diversified ETFs anchor the parts of a portfolio where broad market exposure makes more sense.

Global ETF market

Global ETF assets reached a record US$23.08 trillion at the end of May 2026. That’s up from US$21.91 trillion in April 2026. Overall, assets grew 16.3% year-to-date in 2026. To put that in perspective, the industry started 2026 at US$19.84 trillion. In other words, it added more than US$3 trillion in just five months.

Furthermore, the industry has now recorded its 84th consecutive month of net inflows. That’s a run stretching back seven years without a single month of net outflows.

Of particular note, the Vanguard S&P 500 ETF (VOO) became the world’s first ETF to exceed US$1,000 billion in assets. It crossed that threshold in June 2026. For context, five years earlier it managed around US$225 billion. That growth in a single product speaks to how dramatically investor appetite has shifted.

Looking ahead, Bloomberg projects global ETF assets under management will reach US$35 trillion by 2035. This assumes 10% per annum compound growth. However, given recent growth rates, that forecast may prove conservative. Active ETFs are growing even faster. Global active ETF assets hit a record US$2.49 trillion at end-May 2026, up 28.8% year-to-date.

Australian ETF market

The Australian ETF industry closed 2025 at an all-time high of $330.6 billion in funds under management. That represents 34.2% year-on-year growth and an industry record. Net flows for 2025 hit $53 billion. By comparison, the previous record was $30 billion, set in 2024.

Momentum has continued into 2026. By end-April, the industry had already reached a new record of $346 billion in funds under management. Looking further ahead, Betashares forecasts that the local industry will surpass $400 billion in 2026. Beyond that, it expects the industry to exceed $500 billion by 2028, possibly as early as 2027.

Product choice has expanded as well. A record 71 new ETFs launched in 2025. As a result, the total number on the ASX and Cboe reached 483 by end-May 2026. Around two million Australians now invest through ASX ETFs. That figure shows just how far this product has moved from its institutional roots into the hands of everyday investors.

If you’d like to understand how ETFs might fit into your own financial plan, we’re here to help.