ETFs are set to account for almost a quarter of total fund assets under management by 2027, according to a report from Oliver Wyman, a management consulting firm.
This would mean an eight percentage point increase on ETFs' current market share of 17%, representing $6.7trn in assets at the end of 2022.
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The report, which was commissioned by Waystone, found that total ETF AUM has grown at an approximately 15% compound annual growth rate since 2010, which was reportedly three times faster than standard mutual funds' growth rate.
Kamil Kaczmarski, partner, insurance and asset management at Oliver Wyman, said: "The explosive growth in ETFs has been the single most disruptive trend within the asset management industry over the last 20 years."
He said this could "become a strategic opportunity for the industry to either build an active ETF franchise or rely on support from white-label platforms, which provide a cost-efficient infrastructure for fund initiators to launch their ETFs".
According to the report, the increasing costs of setting up a fund's infrastructure, and the overall "high risk of failure" has seen a rapid increase to white-label ETF providers, which the report said was a "relatively new business model that allows fund providers to quickly bring their strategies to market".
In the report, analysts noted that the US had more ETF launches than Europe, and that since 2019, the number of ETFs in the market had exceeded the number of fund launches in the former.
According to the study, 70% of products launches were ETFs in the US, which the report said was due to a "favourable local regulatory environment which facilitates tax advantages for ETFs".
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The report said "one of the biggest phenomena" within the asset class in the past seven years was the rise in active ETFs.
Between 2016 and 2022, the number of active ETF launches in the US rose 30% per annum, and in Europe it increased by 92% over the same period.
The study said: "The significant increase in active ETF launches in Europe, particularly in 2021, signals that European fund providers are following in the US's footsteps and are shifting their focus more towards active strategies."
