Just 20 years ago, exchange-traded funds (ETFs) were novelties. Now, after two decades of explosive growth, they are firmly entrenched in the asset management landscape. Total US-listed ETF assets reached a record-setting USD2.0 trillion at the end of 2014, up from USD1.7 trillion a year earlier, and inflows totaled USD244 billion for the year. European ETFs also saw record flows in 2014; they attracted USD61.4 billion in new assets, more than three times the 2013 total.

It’s certainly true that even in the US, ETFs are a long way from eclipsing open-end mutual funds, which have about $14 trillion in assets. Still, ETFs’ growth in both assets and products has been impressive, to say the least. The industry tally shows 1,664 products at the end of November 2014, and an average of 150 new funds have been launched each year over the past decade.

Industry analysts expect ETFs to gain even greater momentum in the years ahead, with some projecting a rise to USD5 trillion in total assets by 2020. ETFs are not only growing, but also rapidly evolving as new product types and marketing approaches emerge. And they continue to broaden their reach as they penetrate new investor segments, distribution channels and geographic markets. Welcome to ETF 2.0....

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