There’s no longer such a thing as “the U.S. ETF Market” as the client use cases and behaviors have diverged significantly. All investors seek positive returns, but their time horizons and strategies are dramatically different. The longest-term investors rely on research that points to the odds-on play of buying and holding broad-based, cap-weighted stock and bond ETFs. Other investors extrapolate recent performance with hopes to continue riding a wave.
While U.S. ETF assets under management and flows rose to record levels in the first half of 2026, asset managers split the field with inflows from each constituency. Some continue to compete on price, but others are betting that investors will pay a premium for stellar short-term performance.
Another Banner (Half) Year
ETFs serve investors well. Their tax and operating efficiencies and their ability to insulate investors from the tax consequences and market impact of each other’s actions continue to make them so appealing that, as of June 30, 2026, U.S. ETF AUM exceeded $15.7 trillion across 5,456 products.
01-us-etf-growth
Source: FactSet
At the mid-year mark, U.S. ETF flows are on pace to exceed $2 trillion by year end.
02-us-etf-flows
Source: FactSet
The equity, fixed income, and asset allocation asset classes have already reached about 75% of 2025’s total levels; alternatives have already met the 100% mark. Meanwhile, commodities and currencies saw outflows.
ETF Competition—Creating a Segment Map
Dollar-wise, equity and fixed income comprised 98% of all ETF flows through June 30, 2026. It is within those asset classes that ETF asset managers compete for the attention and dollars of investors of all types.
Although nearly 300 ETF issuers offer stock or bond ETFs, the key is that the contest for ETF dollars isn’t a 300-way scrum. iShares 0-3 Month Treasury Bond ETF (SGOV-US) competes with ProShares GENIUS Money Market ETF (IQMM-US), but not with iShares Core MSCI Emerging Markets ETF (IEMG-US), Invesco NASDAQ 100 ETF (QQQ-US), or Schwab US Dividend Equity ETF (SCHD-US).
Those ETFs each appeal to a specific constituency with a particular use case. Recognizing that, FactSet breaks down the ETF market into basic competitive units that we call segments.
A market segment is defined by its restrictions. The first is asset class: most funds specialize in a single type of securities such as stocks (equities), bonds (fixed income), or commodity futures. There are many ways to group those securities:
Equities can be classified according to economic sector or industry, market capitalization, position on the value/growth spectrum, or dividend yield.
Bonds are differentiated by their issuer type, be it governments, corporations, or a combination of the two.
The charts below show investor interest in each subset. The inner ring shows assets under management; the outer ring shows year-to-date flows.
Size and style ETFs can be broad (with no further investment universe restrictions) or focused on a particular company size or value/growth profile.
Sector ETFs limit their investment universe to companies whose primary revenue source comes from a specific set of businesses or investment themes and can be all-inclusive or limited to a single industry.
Fixed income ETFs can be constrained by credit quality or maturity horizon.
The screenshots below show how our FactSet ETF screener applies each filter.
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06-factset-etf-screener-2
The geographic range of a fund’s investment universe is equally important. Some ETFs span the global equity or bond markets; others focus more tightly. The distinctions can be made by economic-development levels, regions, countries, or even smaller jurisdictions (state-specific municipal bonds, for example).
Furthermore, the investment goal can be either dollar-for-dollar or geared (leveraged or inverse) exposure.
FactSet’s segments are unique combinations of those universe definitions. They can be as broad as Equity: Global – Total Market, which has one ETF with 10,048 different stock positions, or far narrower, such as Commodities: Precious Metals Palladium, which holds nothing but palladium bars (in a vault, of course).
Hundreds of Segments, Not Equally Loved
The ETF market is diverse, covering 876 market segments. Some are tiny monopolies; others contain hundreds of competing products. The chart below sorts segments by the number of funds they contain.
07-fund-distribution
Source: FactSet
Notably, 392 single-fund segments comprise 7% of the total ETF count but house just 0.9% of the assets. Among all segments, 54% hold no more than 25 ETFs. Yet those funds collectively account for just 26% of U.S. ETF AUM. The bulk of the money sits in highly competitive segments.
That is not random.
When assets flow to a segment, first movers might enjoy a brief monopoly, but challengers often rush in. The chart below shows the number of high-asset ETFs across the competitive spectrum, from low to high by fund count.
08-count-of-high-aum-etfs
Source: FactSet
ETF Strategies: Defining the Micro-Environment
Asset managers operating in crowded segments need to make their products visible. The favored method is differentiation, which means offering a new twist or take. This is often done by increasing selectivity or emphasis, by way of inclusion and/or weighting criteria.
FactSet recognizes 28 distinct investment strategies in the U.S. ETF landscape. Unsurprisingly, higher fund counts correlate with a larger number of strategies within a segment, as shown in the chart below.
03-count-of-strategies
Source: FactSet
Trillion-dollar segments don’t fit on the chart. Equity: U.S. – Large Cap and Equity features 16 strategies. U.S. – Total Markets has 15.
These combinations—market segment and strategy group—describe the micro-environments where the true battle for investor dollars takes place.
In previous years, investors exhibited price sensitivity in practically all of the segment/strategy groups. As a result, asset managers competed on price. Recently, a growing minority of investors are willing to pay a premium to chase performance.
Competitive Strategies
The most competitive segments/strategy microenvironments are in equity and fixed income, both plain vanilla and actively managed products, as shown in the chart below.
09-us-etf-flows-by-asset-class-and-strategy
Source: FactSet
Ten strategy-specific segment subsets drew $20 billion or more through June 2026. Half were plain vanilla; the others were actively managed. Vanilla investors favored low-cost funds, but those who bought actively managed ETFs often pivoted to higher-cost options.
That is illustrated in the table below, which shows the expense ratios of ETFs that gained or lost market share within their segment/strategy microenvironment. Instances where higher-priced products dominated lower-priced ones are shaded gray.
10-etf-expense-ratios
Source: FactSet
Investors in half of the actively managed ETF microenvironments with $20 billion+ of inflows bought pricey products and shunned the cheaper ones. Those who bought into passive products largely did the opposite.
What Matters Most in ETF Selection? It Depends on Who You Ask
Two case studies illustrate the differences in their product-selection logic:
From actively managed unconstrained bonds, the Fixed Income: Global – Broad Market, Broad-Based Segment
Equity U.S. – Total Market Vanilla
Unconstrained bond funds allow their portfolio managers total discretion to invest in any bond, of any issuer type, credit quality, or currency. Fidelity Total Bond ETF (FBND-US) has long dominated that microenvironment. At the beginning of the year, it held $23.5 billion in AUM, 25% of all active unconstrained bond ETF assets. Its top two competitors, namely PIMCO Multisector Bond Active Exchange-Traded Fund (PYLD-US) and JPMorgan Core Plus Bond ETF (JCPB-US) respectively held 11% and 10% of the category’s assets.
PYLD has been outperforming FBND since December 2023. This can be seen in their performance charts and in their quarterly percentile rankings.
11-fbnd-vs-pyld performance
Source: FactSet
12-performance-rank
Source: FactSet
PYLD posted top-quartile performance in 8 of the past 10 calendar quarters. FBND did so just twice. To many investors, that justifies PYLD’s price tag of 0.64%/year, which is nearly twice FBND’s charge of 0.36%/year.
Unconstrained actively managed bond ETF investors noticed this. They bought shares of PYLD at a much faster rate than its initial market share would have predicted. FBND lost ground, ending June with just 22% market share. PYLD and JCPB picked up the slack.
So far, that choice has worked out well for PYLD buyers. Then again, JPMorgan Equity Premium Income ETF (JEPI-US) purchasers were pretty pleased with themselves in 2022 and 2023, before JEPI started lagging far behind the S&P 500, its performance benchmark, represented in the chart below by the Vanguard S&P 500 ETF (VOO-US).
13.1-jepi-performance
Source: FactSet
It must sting, paying 0.35%/year for JEPI while VOO’s investors shell out just 0.03%.
Lots of ETF investors continue to maximize diversification and minimize costs, as we see in the second case study focused on Equity U.S. – Total Market Vanilla ETFs. In this instance, two vanilla ETFs gained the most market share—Vanguard Total Stock Market ETF (VTI-US) and iShares Core S&P Total U.S. Stock Market ETF (ITOT-US)—and cost just 0.03%/year compared to the market-share loser iShares Russell 3000 ETF (IWV-US), which costs 0.20%.
Investors who choose VTI often have nothing to report at a cocktail party, as the top-half performer rarely makes it to the top quartile, at least on a quarterly basis (comparison vs the full segment, not just VTI’s vanilla competitors).
14-vti-performance-rank
Source: FactSet
These folks take a longer view. They understand the vast majority of funds that take active risk against the market often go home empty-handed, as their bets work out unevenly while their costs continually drag down performance. That is how an ETF representing the entire U.S. stock market winds up with 10-year rolling performance levels that puts it slightly above or below the 75th percentile on the regular.
PYLD investors have been chasing performance and paying a high price to do so. VTI investors are likely shaking their heads and laughing all the way to the bank.
As new clients come to ETF investing, asset managers have an opportunity to appeal to a wide variety of investment approaches. Some folks are price-sensitive; others have different aims.
For asset managers who find a sweet spot, as Roundhill has done with Roundhill Memory ETF (DRAM-US), profits await. But take heed: outperformance—and the assets that chase it—don’t last forever. Furthermore, a competitor may soon offer a cheaper alternative, as Corgi is doing in the geared ETF segments.
For investors, it’s never been more important to do your homework and check your investment thesis. The ETF landscape continues to expand and overwhelm with choices.
This blog post is for informational purposes only. The information contained in this blog post is not legal, tax, or investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.
