The ETF Boom: Exploring Record Inflows and Innovations in 2025

While ETFs have been making headlines here at the New York Stock Exchange last week, Greyscale rang the opening bell to celebrate its new multi-token crypto fund, and just this Tuesday, Bitwise launched its staking ETF.

It shows just how strong the environment is for ETFs right now after a record breaking year last year, they're on track for another one with more than $1 trillion in new inflows expected this year.

Crypto ETFs have played a big role in those records, with institutional investors looking for safer ways to get exposure to digital assets, and big tech surge fueled by strong AI demand has helped push the major US stock averages to new record highs.

Joining me to weigh in this morning is Burke Ashenden, who's VP of capital markets and institutional strategy at Innovator Capital Management.

Burt, You here.

Thank you so much for joining me.

Thanks for having me, Remy.

Well, it's been a record year for inflows when we're looking at funds as well as product launches.

So tell me what's behind this growth.

It's amazing.

ETFs have been a juggernaut this year.

We're calling it the Triple Crown, so it's flows, it's launches, it's volume.

We're going to break records for all 3 this year in ETFs, and it's really interesting.

I've been in this space for about a decade at this point, and you see the broadening out of.

In the beginning it was passive ETFs.

They thought of equity passive.

That's all ETFs were.

And then it came fixed income ETFs with active and passive fixed income.

But the story this year really is active ETFs.

They've made up 1/3 of flows this year into ETFs that used to be a single digit percent number, and there are actually more active ETFs now listed than passive ETFs, which is astounding.

That never existed.

Within that active ETF category, one really.

Fast growing subsection is options based and derivative based ETFs, so buffer ETFs to find outcome ETFs, and you're seeing ETFs sort of penetrate these different market segments that they never had before.

So it was always cheap passive, and now you're seeing structured note replacement with buffer ETFs.

You're seeing hedge funds being disrupted a little bit by some of these more defensive ETFs.

So it's a really exciting time in the space.

Yeah, and Burke, you're joining me as we head into the final months of 2025 and the day after the Fed meeting, but also on the heels of earnings out from big tech names.

So of course this year there's been a lot of focus on artificial intelligence and with concentration. comes risk, hence the term concentration risk.

But when it comes to the AI space, what do we need to pay attention to and what are ways to avoid some of the drawdowns?

So we talk a lot with our clients about AI.

There's this big story right now.

Are we in a bubble?

That's the question that everybody is asking.

Um, you know, I think we have a long way to go.

If you look at the stocks right now, there's a lot of excitement priced into these names.

No doubt the valuations are elevated, but from our seat, we kind of take a step back and we look at the numbers.

And if you look at tech companies right now and their revenues and specifically just companies in general, they only spend about 2% of their technology budget on generative AI that. is expected to 5x over the next few years, so 10% of that budget, and revenues will follow.

So we're in a place right now where there's a lot of excitement, rightfully so, because it's a new technology, and the big conversation that we're having with investors is how can we maintain exposure to those AI names but with some sort of built-in protection if it's a floor or if it's a buffer against losses.

Yeah, and it's amazing because we see those headlines with these AI plays Nvidia hitting that $5 trillion market cap and $4 trillion market cap as well.

So this is an area we'll definitely keep our eyes on.

But it's also interesting when we're talking about ETFs that some of these institutions like pensions and endowments are also moving into funds.

So what's behind this growth?

Really interesting.

So ETFs have a couple of different types of investors.

You got retail investors like you and I who are just buying them in their brokerage accounts.

You have financial advisors who are actually managing money on behalf of folks like us, and then you have institutional investors.

That's sort of the third bucket, and institutional investors historically have been smaller users of ETFs.

They get access to all these interesting private managers and credit and equity, so they don't. use ETFs beyond just cheap data or as a liquidity vehicle.

What we've seen at Innovator is these groups now are taking a hard look at their traditional hedge fund sleeve, which is semi-liquid in nature, super expensive, may have underperformed if you're in some of those lower tier managers, and they're saying how can we take that exposure still have risk management, but at the same time attach that to the equity markets at a lower cost with daily liquidity, and that's really the thing.

It's liquidity right now.

If I had to sort of bucket the reason that folks are moving into ETFs, it's that daily liquid nature, and a lot of these institutions we speak with pensions, endowments, foundations, they have a ton of private equity, they have a ton of private credit in their portfolio, so they're taking a look right now in this kind of turbulent political environment.

They're saying we need some liquidity.

So that's where they're looking to ETFs.

Yeah, and while we're talking about innovations and ETFs, I do want to get your take.

On what we're seeing when it comes to digital assets.

So why are we seeing this drive when it comes to ETFs?

Yeah, so I mean the digital asset intersection with the ETFs and institutions, it's really interesting.

So the crypto ETFs, you look at some of the larger issuers, BlackRock has one, Grayscale, you're seeing adoption by institutions with crypto ETFs, and they're saying, you know what, we, it's almost, it's shifted a little bit.

It's changed.

From explaining why you are invested in it to explaining why you are not invested in crypto, you've seen this giant shift in the institutional space.

So now institutions are saying, OK, I'm going to carve out 1 to 2% of my risk budget to something like a Bitcoin ETF.

But remember, Bitcoin's volatile, it's risky.

So you have this more volatile asset.

How can you dampen the volatility in the other part of your portfolio?

Another case for using buffer ETFs.

OK, Burke, it was great having you on live at the New York Stock Exchange.

Thank you so much for joining us and thank you so much for your perspective.

Thanks, Remy.

My pleasure.