The U.S. ETF market will grow $20 billion over the next 12 months and will likely hit$2.5 trillion in five years, according to Jon Maeir, senior investment strategist for ETF Portfolio Solutions at Merrill Lynch Wealth Management.

Maeir makes these forecasts in his recent white paper, ETFs: Beyond the Basics. Other insights from the paper include:

Since the first ETF listing in the U.S. almost two decades ago, ETFs have grown into a $2.0 trillion global industry  with most of the growth coming in the past five years. Over 70% of the global industry is concentrated in the U.S.
Merrill Lynch team expects that U.S. ETF market assets will grow by roughly $200 billion over the next 12 months, with assets likely to reach roughly $2.5 trillion within the next five years from a combination of organic growth and existing assets appreciating in value.

The correlation between market volatility and index product and ETF use has been high recently. However, the risk in indexation is also partly due to a sweeping set of changes in the asset management industry that emphasizes asset allocation over stock-picking, and have tended to benefit low-cost, broad market exposure vehicles.

Exposure to previously inaccessible or cost-prohibitive markets and expansion of products in non-U.S. markets, especially in Europe.

Strong demand for index products in what have been volatile markets in the years following the 2008 financial crisis, during which active managers have largely underperformed their benchmarks.
   

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