Investment consultants across the United States are changing the way they build portfolios. Instead of relying mainly on traditional actively managed mutual funds, more advisors are choosing exchange-traded funds (ETFs). This shift marks one of the most important structural changes in portfolio construction over the last decade, supported by data across major industry research firms and asset-management institutions.
Recent research* shows that last year, financial advisors significantly increased their allocation to ETFs, which now account for nearly 32.6% of assets under management (AUM), marking a rise from 23.6% in 2023.
One of the biggest surprises is how quickly active ETFs are taking hold. The average portion of ETF assets dedicated to active strategies climbed to 29% in 2025 (up from 25% in 2023), with 80% of advisors now utilizing active ETFs.
Clear Movement From Mutual Funds To ETF
During the first nine months of 2025, U.S. mutual funds saw net outflows of around $190 billion, while ETFs attracted approximately $865 billion in net inflows. This divergence highlights an ongoing structural shift toward ETFs, driven by their lower costs, greater liquidity, and tax efficiency.
Also, as per Investment Company Institute, in the week ending December 30, 2025, long-term mutual funds posted net withdrawals of approximately $4.9 billion, while ETFs recorded net creations of about $53.7 billion. This trend continued into early 2026, with the period ending January 7 showing estimated mutual fund outflows of $23.3 billion, compared with $16.2 billion in ETF net issuance, highlighting the ongoing migration of investor capital away from mutual funds and into ETFs.
What’s Driving the Enthusiasm
This market evolution is primarily driven by the inherent cost benefits and favourable tax treatment associated with ETFs. Furthermore, ETFs are attractive because they are liquid, tradeable throughout the day, and offer both transparency and flexibility to investors who prioritize maintaining liquidity and distributing capital gains efficiently.
Large consulting firms and well-known asset managers are also joining this shift. Reports from Institutional Investor show that established firms like Westwood Holdings are rolling out more ETF products because they see stronger growth opportunities in the ETF market.
Also, several established mutual fund managers, including Cohen & Steers, Thornburg, and Russell Investments, have recently launched their first ETFs, following MFS’s debut of active ETFs late last year. As of May 30, active ETFs held a record $1.39 trillion in global assets (according to ETFGI) attracting a record $220.25 billion in investor capital, confirming over five years of consecutive inflows.
As per the latest ETFGI report, the U.S. ETF market is expanding at unprecedented speed, surpassing $13.08 trillion in assets by the end of October 2025. October alone saw a record-breaking $186.19 billion in net inflows, pushing year-to-date inflows to $1.14 trillion, approximately 32% higher than the same period in 2024. With 42 consecutive months of positive inflows, ETFs have proven themselves to be one of the most durable and reliable investment vehicles on Wall Street.
As per Blackrock, with product innovation accelerating and investor appetite rising, this momentum is expected to persist, with global active ETF assets projected to reach about $4.2 trillion by 2030. Also, Deloitte projects that active ETF assets in the U.S. will expand from $856 billion in 2024 to $11 trillion by 2035, representing a more than 13-fold increase.
ETF Adoption in the GCC
That same ETF tailwind could be a major opportunity for the GCC (Gulf Cooperation Council) region. As U.S. advisors lean into ETFs, asset managers and consultants in the Gulf are watching closely — and many are already responding to local investor demand. This trend is driven by the region’s expanding asset management industry, which is diversifying its product offerings to better meet the evolving needs of a more varied base of local investors.
Both Saudi Arabia and the UAE are actively pursuing strategic initiatives to expand their asset management industries. As of October 25, there are 33 ETFs actively trading in the GCC market, including 17 in the UAE (around $337 million), 13 in Saudi Arabia (about $2.6 billion), 2 in Qatar and 1 in Egypt.
Although the number of listed ETFs is still small compared to global markets, the runway for growth is significant. Assets under management have been climbing gradually thanks to increasing retail participation, institutional portfolio diversification, and the introduction of thematic and Shariah-compliant ETFs. As of October 25, the ETF’s AUM stood at around $2.6 billion in Saudi Arabia and $337 million in the UAE.
Looking Forward
With equity, bond, commodity, and active ETFs all seeing massive inflows, 2025 is poised to become the strongest growth year ever for the ETF industry. Overall, this shift to ETF is positive for investors. Advisors can work more efficiently, clients pay lower fees and get more transparency, and asset managers can reach a growing market. With strong ETF inflows and widespread advisor adoption, the move away from traditional active funds is becoming one of the most important trends shaping the future of investing in America.
Meanwhile, the GCC ETF market is still in its early-stage adoption phase compared to more mature markets such as Europe and the United States. The GCC ETF market is expected to maintain its robust growth, with a projected compound annual growth rate (CAGR) of 10%-12% from 2025 to 2030.
The Saudi Arabian government targets to increase the industry’s AUM to 40% of the GDP by 2030, a significant jump from 26% in 2024. UAE is forecasted to grow the fastest at a 6.52% CAGR through 2030. Moreover, by asset class, fixed-income ETFs are projected to grow at a 6.73% CAGR through 2024-2030.
Supported by strong sovereign wealth fund ecosystems, regulatory reforms, digital innovation, and changing investor preferences, the GCC presents a compelling case for investors seeking first-mover advantage in a market poised for exponential expansion.
*Data sourced from Escalent, Institutional Investor, Deloitte, Blackrock, ETFGI
