MW Inside the great ETF boom of 2025: 'How do you navigate all this?'
By Christine Idzelis
A record flood of new cash. Risky leveraged and inverse products. Hedge-fund and private-equity firms getting in. Exchange-traded funds are the investing story of the year.
For 25 years, Dan Ives worked on Wall Street and became known for appearing on business television programs wearing colorful shirts and jackets to talk up technology stocks. Then in June, Ives started something new, slapping his name on his own exchange-traded fund, the Dan IVES Wedbush AI Revolution ETF, an investment vehicle made up of 30 stocks.
"There's thousands of ETFs, but there's only one Dan Ives," Ives said in a phone interview.
Ives, the head of technology research at Wedbush Securities, said the new ETF IVES takes all of his knowledge and packages it into a portfolio of "winners" that he has identified within the evolving theme of artificial intelligence. The Ives product is the first ETF ever launched by Wedbush and, as of July 16, it managed about $344 million in assets.
Ives is getting in on the great ETF boom of 2025. The ETF, a basket of assets listed on an exchange just like a stock, has become a magnet for just about every existing or aspiring asset manager on Wall Street to reach individual investors with a wide range of strategies, including some that are risky and complex.
The number of U.S.-listed ETFs has surged in recent years to more than 4,300 - along with the industry's assets, which at the end of June were at record levels of around $11.6 trillion, according to Aniket Ullal, head of ETF research and analytics at CFRA Research. Investors poured an unprecedented $556 billion into U.S.-listed ETFs during the first half of this year, with the inflow frenzy putting them on pace to shatter the annual record in 2025 after attracting an all-time high of $1.15 trillion in 2024, a report from State Street Investment Management shows. The U.S. industry's total assets under management have swelled from $4.25 trillion at the end of May 2020, when there were around 2,300 ETFs listed in the country, according to research from JPMorgan Chase & Co.
With its U.S. roots tracing back to the 1993 launch of an ETF simply tracking the S&P 500, the industry has morphed into a vast landscape offering exposure to everything from stocks and bonds to crypto assets and alternative strategies associated with hedge funds and private markets. Even a company linked to the president of the United States is joining this game, announcing planned ETFs with an "America First" investment theme and targeting crypto assets.
While assets have soared on the back of popular low-cost funds that track broad equities and fixed-income indexes, the ETF industry has evolved to include a much wider range of strategies, including actively managed funds run by investment professionals seeking to beat the market. And investors can sift through a variety of thematic ETFs focused on areas like the music industry or artificial intelligence. Then there are funds designed with options-based strategies to provide income or downside protection, as well as ETFs used as trading tools to amplify bets on single stocks.
It's a marketplace in which leveraged and inverse ETFs provide traders a chance to multiply returns reaped from the gain of a single stock - or to profit from its fall. Such ETFs can be perilous and can soar or plunge in a single day. They are not designed to express long-term investing views.
"There's so much variety and complexity of product out there," with more than 4,000 tickers now, Scott Chronert, head of U.S. equity strategy and global ETF research at Citigroup, said by phone. If you are an everyday investor, he added, "how do you navigate all this?"
'We don't want people to think of investing as gambling'
In late March, asset managers and members of the financial-advice community descended upon the Virgin Hotels Las Vegas for the Exchange conference, a popular annual ETF event that in previous years was held in Miami Beach, Fla. The main entrance to the Virgin Hotels Las Vegas opened up to a casino with slots and table games.
If the ETF industry's early days were all about providing investors with cheap and diversified exposure to the stock market by shadowing broad indexes, then the change of venue to Las Vegas this year underscored some of the ways the industry has both branched out and sizzled.
The venue was intentionally "off the Las Vegas Strip," Todd Rosenbluth, head of research at ETF analytics firm TMX VettaFi, told MarketWatch on the sidelines of the Exchange event in March. "We don't want people to think of investing as gambling."
Investors have gravitated toward exchange-traded funds in part for their ease of trading - ETFs can be bought and sold throughout the day like a stock - but also for their transparency, relatively low costs and tax efficiency. ETFs provide the masses with access to different asset classes without a minimum investment threshold, including in previously exclusive pockets like private markets and hedge-fund-style strategies historically only available to high-net-worth and institutional investors who had to pay high fees.
The world's biggest hedge-fund firm, Bridgewater Associates, is now forging ties to everyday investors in the ETF industry. Karen Karniol-Tambour, Bridgewater's co-chief investment officer, was among the speakers at the Exchange event in Las Vegas. In a session on the hedge-fund firm's "all-weather" approach to investing, Karniol-Tambour made a pitch about diversifying portfolios without "losing return." The actively managed SPDR Bridgewater All Weather ETF ALLW, launched by State Street in partnership with the hedge-fund firm in early March, may invest across stocks globally, nominal and inflation-linked bonds and commodities.
Actively managed ETFs tend to have higher fees than passive funds, which is attractive for fund managers who can pull in investors searching for higher returns. With an expense ratio of 0.85% of invested assets, the SPDR Bridgewater All Weather ETF is more expensive than simple index funds that broadly track the performance of U.S. stocks and bonds. The SPDR S&P 500 ETF Trust SPY has a 0.0945% expense ratio, while the fee for the iShares Core U.S. Aggregate Bond ETF AGG is 0.03%.
One strategy associated with the hedge-fund world that has become increasingly available via ETFs is managed futures, with a systematic, trend-following approach to trading futures contracts across different asset classes.
In March, BlackRock launched the iShares Managed Futures Active ETF ISMF. Later that same month Invesco listed the Invesco Managed Futures Strategy ETF IMF, and in June, Fidelity Investments launched the Fidelity Managed Futures ETF FFUT.
State Street created a lot of buzz in late February with its private-credit ETF, as the industry continues to work on ways to include private assets in exchange-traded funds. Private-credit funds have raised loads of money from wealthy and institutional investors in recent years to make loans to private-equity-backed companies and other higher-risk borrowers that used to be served by banks. Some types of private credit may be considered investment grade.
Part of the challenge is that ETFs may be traded throughout the day, while private assets are illiquid, creating a liquidity mismatch. State Street's ETF, which may invest in private credit sourced by the elite Wall Street firm Apollo Global Management, while also holding publicly traded debt securities, was renamed SPDR SSGA IG Public & Private Credit ETF PRIV in late March without changing its investment strategy, according to a filing with the Securities and Exchange Commission. State Street is planning a second ETF that provides exposure to private debt that may be sourced by Apollo, the SPDR SSGA Short Duration IG Public & Private Credit ETF, according to an SEC filing in May.
The worst-case scenario surrounding a liquidity mismatch is that "there's some kind of crazy market event and everyone is redeeming their shares from the ETF," while at the same time fund managers are unable to exit some of their positions in private markets, Alyson Shupe, head of global product strategy at Goldman Sachs Asset Management, said in a phone interview, or that some type of "backstop" is needed in order to provide investors liquidity.
ETF investors can also find equity exposure in private markets. The second-largest holding of the ERShares Private-Public Crossover ETF XOVR was Elon Musk's privately held SpaceX as recently as July 16, with a more than 7% weight, data on the EntrepreneurShares website show. ERShares said in December that the ETF relaunched last year so that 85% or more of its portfolio would be allocated to an index of 30 U.S. large-cap entrepreneurial stocks, with up to 15% made up of private companies like SpaceX.
Amplifying profits and losses
The Defiance Daily Target 2X Long HIMS ETF HIMZ is a vehicle traders can bet on to magnify potential returns from Hims & Hers Health Inc.'s stock. Those who did that learned in June that the telehealth company's key partnership with weight-loss-drug maker Novo Nordisk had abruptly been terminated. The company's stock tumbled by 34.6% in a single day on the news. But the ETF, which seeks to provide daily leveraged investment results of two times the daily percentage change in underlying share price, plunged by nearly 69%, according to FactSet data. The bloodbath underscored the risk associated with leveraged ETFs.
Sometimes those trades can pay off. The Direxion Daily PLTR Bull 2X Shares PLTU, a leveraged ETF designed to amplify bullish trades on the daily performance of Palantir Technologies Inc. (PLTR), skyrocketed about 47% on Feb. 4. And the GraniteShares 2x Short TSLA Daily ETF TSDD - which provides traders a way to bet on the potential fall of Tesla Inc.'s stock by seeking to double the daily inverse results of its performance - surged 28.5% on June 5. Tesla's shares $(TSLA)$ dropped more than 14% that day.
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July 17, 2025 09:05 ET (13:05 GMT)
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