A quiet change has been reshaping how trillions of dollars flow through American markets, and Citigroup just attached a large new number to it. The shift is not obvious on any price chart, but it is showing up in fund flow data across nearly every month of 2026.
Wall Street firms are repositioning product shelves, asset managers are launching new strategies, and the fund you hold today may look very different by 2030. In a fresh industry outlook, Citi said U.S. exchange-traded fund assets could more than double over the next five years, reshaping household investment menus.
You may already own one of these products through a 401(k), a brokerage account, or a model portfolio your advisor built out for you. The timing of the shift matters because actively managed ETFs often cost more than their index peers, which can eat into your long-term investment returns.
The question now is whether the next decade rewards the strategies inside your fund, or leaves those holdings trailing the broader market.
The Citi forecast that changes the ETF conversation
The outlook is the clearest signal yet that the ETF industry is entering a new phase, moving past the simple passive index story. The bank expects U.S. ETF assets to climb from roughly $10.4 trillion in March 2025 to $25 trillion by 2030, according to Citigroup.
By 2035, that total could push to $42 trillion, a meaningful upgrade from Citi’s earlier projection of $29 trillion for the same year. U.S.-listed ETF assets climbed from about $10.4 trillion in March 2025 up to $13.46 trillion by year-end 2025, according to Analytics Insight.
The more interesting detail sits in the type of product Citi expects to drive most of the growth throughout the coming decade of expansion. Drew Pettit, Citi’s ETF strategist, said active ETFs should double their share of total ETF assets from 10% to 21%, according to InvestmentNews.
How active ETFs moved from niche to mainstream
Active ETFs were once a small corner of the market, largely ignored by average investors who preferred low-cost index funds for simplicity. That picture has changed quickly over the past three years, as fund companies pushed fresh active products into the space at a record pace.
Active ETF assets have grown at a three-year compound annual rate above 59%, nearly twice the broader industry rate, according to J.P. Morgan Asset Management. The flow data tell the clearest version of this story, and it is striking once you look closely at the share of new investor money.
Active ETFs drew up to $475 billion in inflows during 2025, accounting for about 32% of all net new ETF money, according to Analytics Insight.
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More than 38% of ETF flows through early 2026 have moved into active strategies, according to the J.P. Morgan Asset Management ETF Monitor. Product launches show a similar trend, and the numbers suggest asset managers already see where investor money is heading in the years ahead.
More than 80% of new ETF launches in 2025 used active strategies, a sharp reversal from the industry’s passive-dominated formative years, according to Analytics Insight. Active funds currently account for roughly 84% of all total ETF launches so far in 2026, according to the J.P. Morgan ETF Monitor.
Open-end mutual funds are feeling this squeeze because the cheaper, more tax-efficient ETF wrapper keeps pulling in new money from households across the country.
U.S. equity funds shed around $34 billion during January 2026 alone, continuing a multi-year trend of persistent outflows, according to Morningstar. The broader shift from old-school mutual funds to ETFs is pulling active management along and rapidly transforming the investment landscape.
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What Citi’s active ETF call means for your money
The Citi outlook is more than a research note because it signals that your portfolio will likely shift, whether you act on it or not. Workplace retirement plans, robo-advisors, and advisor model portfolios are adding active ETFs across equity and bond sleeves as product menus continue to expand rapidly.
U.S. active ETF assets will rise from around $856 billion at the end of 2024 to roughly $11 trillion by 2035, according to Deloitte.
Here is what the forecast means in concrete terms for your own investment choices over the next several years of portfolio construction and periodic rebalancing.
3 ways this shift may affect your portfolio
- Your mix may tilt toward active as advisors and model providers add active ETFs to core and satellite positions, according to Morningstar.
- Fees and tax outcomes may improve because ETFs generally carry lower expense ratios and stronger tax efficiency than comparable mutual funds, according to the SEC.
- Your risk exposure may change as actively managed funds take sector bets and factor tilts that pure index funds never take on.
Active ETFs also disclose holdings each trading day, which helps you see what a portfolio manager owns before you commit fresh capital. That daily transparency is a real advantage over mutual funds, which often report holdings with a delay, according to the SEC.
Where active ETFs shine, and where they can disappoint
Active ETFs are not a single category, and grouping them together obscures real differences in strategy, risk, and long-term historical performance. Pettit and his team at Citi highlighted opportunities in niche strategy ETFs, core bond and equity portfolios, and dividend-focused themes.
Those segments benefit most from manager skill, sector timing, or income-generation strategies that a plain index fund is not designed to capture effectively. Fixed-income ETFs are a strong example, with assets reaching roughly $2.27 trillion by year-end 2025, up 26% year over year.
“Active ETFs are some of the best opportunities around when you pair strong management with low fees and tax advantages,” said Russel Kinnel, senior principal of ratings, Morningstar.
Active management does not guarantee outperformance, as the historical record of active mutual funds lagging benchmarks over long periods is well documented. More than 80% of large-cap active funds lagged the S&P 500 over the past fifteen years, according to S&P Dow Jones SPIVA data.
ETF versions face the same challenge, even though lower fees and better tax efficiency narrow the long-term gap relative to their mutual fund siblings today. Knowing the specific strategy behind each active ETF on your shortlist helps you avoid overpaying for market exposure you could obtain more cheaply.
How can you position a portfolio for the shift?
You do not need to chase every new product, and piling into active ETFs without a clear plan can create more problems than it solves.
A measured approach lets you benefit from the industry’s growth without exposing yourself to strategies that may not fit your timeline or risk tolerance. The investor education site at Investor.gov is a useful starting point for understanding any fund you plan to hold.
Related: Citi exposes the tax break most investors leave on the table every year
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