7 vanilla and ‘hot sauce’ ETFs Bloomberg is watching

In a recent webinar, Bloomberg Intelligence’s Eric Balchunas, one of the ETF industry’s most respected analysts, shared his insights on the explosive growth and key trends shaping the ETF market.

US ETF flows hit a record US$1 trillion last year, propelling global ETF assets to US$15.2 trillion in 2024, a 32% surge from the previous year. Records were set across Australia, Asia, and Europe, underscoring the industry's rapid expansion. Flows accounted for 44% of the increase, with the balance from market performance.

“I really do think this might be as good as it gets. The flows were US$1 trillion, the Eagles beat the Chiefs in the Super Bowl ending that awful dynasty ... and there were just records all around. ,” Balchunas says, emphasising that such extraordinary inflows are unlikely to repeat.

Looking ahead, he forecasts global ETF assets will reach US$35 trillion by 2035, a staggering milestone for an industry still in its fourth decade. “35 by 35” is the phrase he uses to encapsulate this rapid trajectory.

With that in mind, here are seven ETFs that Balchunas and his team are watching in 2025 that could be of interest to Australian investors. From traditional market leaders to 'hot sauce' strategies investors are using to add alpha, these funds highlight key themes shaping the future of investing.

Balchunas stresses that these are not Bloomberg recommendations but rather a reflection of notable asset classes and market opportunities to watch in 2025.

Please note: These ETFs are US-listed, and where possible, we’ve identified Australian equivalents. This is not financial advice - some Australian ETFs may not precisely mirror their US counterparts, so investors should conduct their own research.

#1 - Bitcoin: The Greatest ETF Launch in History

The iShares Bitcoin Trust ETF (NASDAQ: IBIT) shattered records, hitting US$50 billion in assets in just 200 days after launching in January in 2024 and earning the title of the "greatest launch in history."

Balchunas attributes IBIT’s success to several key factors: BlackRock CEO Larry Fink's full-throated advocacy for Bitcoin as a store of value, and the ETF's stunning performance, up 112% in 2024, partly thanks to how the ETF structure makes it easier to access the asset class compared to opening a crypto wallet.

“When you have Larry Fink going on CNBC, Fox and Bloomberg talking about Bitcoin as a store of value, can hedge against governments going crazy and inflation ... to me you can’t overstate the importance of this in giving advisers cover,” he says.

"The fact that BlackRock has the name on the tin, Larry is going out there and saying this stuff and you throw into the mix Fidelity and Invesco, this gives them a lot of cover because remember there was a huge stench left by 'Sam Bankman-Fraud' after he took FTX down.

"And I've always said when he was doing his thing ETFs that are 'SBF-proof'. Nobody will ever run away with the money, all the Bitcoin is stored with the custodian and ETFs being physically backed means you can't have an SBF."

He expects Bitcoin ETFs to pave the way for more crypto funds but warns that excessive niche offerings could suffer the same fate as failed commodity ETFs like nickel and aluminum.

How to play crypto in Australia?

• VanEck Bitcoin ETF (ASX: VBTC) – Physically backed by Bitcoin, held in cold storage.
• Monochrome Bitcoin ETF (CBOE: IBTC) – Tracks Bitcoin’s AUD price, holding it directly.
• Global X 21Shares Bitcoin ETF (CBOE: EBTC) – Holds Bitcoin (in AUD), redeemable for physical Bitcoin.
• Monochrome Ethereum ETF (CBOE: IETH) – For those looking to expand into Ethereum.
• Betashares Crypto Innovators ETF (Betashares Crypto Innovators ETF) – ‘Picks and shovels’ exposure to crypto miners, exchanges, and infrastructure.

#2 - Nuclear Energy: The Power Play for AI & Clean Energy

How did that happen? Not all thematic ETFs are created equal. It’s crucial for investors to look under the hood before investing.

NUKZ takes a broader approach, covering advanced reactors, utilities, and fuel production, rather than just uranium miners exposed to pricing risk. Its top holdings include nuclear tech firm Oklo Inc. (NYSE: OKLO) and plant operator Constellation Energy (NYSE: CEG). 

"We think the NUKZ and URNM ETFs are green investing for realists," Balchunas says.

"You need energy for AI and a lot of these firms like Microsoft, Google and Amazon are building mini-reactors or buying them. And if you see those types of leaders in America getting comfortable with nuclear that's going to tilt public sentiment.

"And if you want to fight climate change and keep a convenient lifestyle, you have to embrace nuclear. You can’t do it on just solar and wind, and this is powerful. We're seeing a lot of flows here."

How to play it in Australia?

• The Betashares Uranium Miners ETF (ASX: URNM) invests in a portfolio of companies linked to the exploration, development and production of yellowcake.
• The Global X Uranium ETF (ASX: ATOM) offers exposure to companies involved in uranium mining and the production of nuclear components.

#3 - European Equities: for real this time

Balchunas’ colleague, Athanasios Psarofagis, argues that European equities belong on investors' watchlists. Why? After years of lagging the S&P 500, a value rotation could be on the horizon, especially if the Trump administration’s ‘Made in America’ policies create headwinds for U.S. stocks.

"At some point this has got to work for a trade," he says.

"What I think is really interesting and not talked about enough is if you look back at 2017 during the first Trump term, MSCI Europe beat the S&P 500 and we're on that same path this year," he says.

However, Psarofagis laments the limited options for European ETFs with meaningful tech exposure, as many are dominated by banks and industrials, leaving investors with little access to European innovation.

That’s why he highlights the First Trust IPOX European Equity Opportunities ETF (NYSE: FPXE), which stands out with the highest tech weighting among US-listed European ETFs at 19.36%.

“If you’re going into Europe, at least give yourself a fighting chance. Pick up an ETF that includes newer names and some of the innovation happening in Europe," he says.

How to play it in Australia?

There are numerous ways to get exposure to European equities in Australia including:

• iShares Europe ETF (ASX: IEU) - Offers exposure to 350 of Europe’s largest companies.
• Vanguard FTSE Europe Shares ETF (ASX: VEQ) - Invests in ~1,300 European stocks across all market caps.
• Global X ESTX EURO STOXX 50 ETF (ASX: ESTX) - Holds the Eurozone’s 50 largest firms, with the highest tech exposure.
• Betashares Europe Currency Hedged ETF (ASX: HEUR) – Provides exposure to over 120 of Europe’s largest companies, hedged into AUD.

Of these funds, Global X's strategy has the highest exposure to the European technology sector with a 16.9% weighting.

#4 - S&P 500 etfs: the vanguard effect is growing

For ETF enthusiasts tracking global trends, the dethroning of State Street’s SPDR S&P 500 ETF (ASX: SPY / NYSE: SPY) as the world’s largest ETF has just occurred and is a moment in history to witness.

SPY, the first U.S.-listed ETF, launched in 1993 and has grown to US$630 billion in assets. However, its 0.0945% fee is more than triple that of its fast-growing competitor, Vanguard’s S&P 500 ETF (NYSE: VOO), which charges just 0.03%. This rock-bottom fee has helped VOO amass over US$500 billion, steadily chipping away at State Street’s dominance.

It’s all part of what Balchunas calls "the Vanguard effect", where Vanguard enters an established category, slashes fees, and leverages its marketing machine to dominate inflows.

“VOO is so powerful that once it overtakes SPY, it’ll likely be King for decades. Money in it is very sticky,” he says.

This shift underscores the power of low fees, something Australian issuers should take note of.

How to play it in Australia?

As many of our dedicated ETF followers are aware, the iShares S&P 500 ETF (ASX: IVV) is the most-tipped ETF among our audience for 2025 and charges a fee of 0.04%. Along with SPY, which is cross-listed on the ASX. 

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Your 10 most-tipped ETFs for 2025

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It should be noted the Vanguard U.S. Total Market Shares ETF (ASX: VTS) at 0.03% offers broad exposure to the U.S. market, with over 3,500 American shares, and is another option for exposure to the breadth and depth of the world's biggest economy (and to be part of "the Vanguard effect"). 

#5 - The Resurgence of American Manufacturing

With the return of the Trump administration and its America First agenda, Bloomberg suggests this could be a boon for ETFs tied to U.S. manufacturing and reshoring. Policies driving supply chain disruptions, trade barriers, and geopolitics could accelerate the shift back to domestic production.

Psarofagis highlights the Tema American Reshoring ETF (NYSE: RSHO), designed to capture the revival of U.S. industrial manufacturing and infrastructure, notably with negligible tech exposure.

“It's getting some really decent attention with over $200 million in assets. You also have copycats like BlackRock with their iShares U.S. Manufacturing ETF (NYSE: MADE) and you potentially have Trump's company with a 'Made in America' ETF," he says.

How to play it in Australia?

No ASX-listed ETF currently offers direct exposure to U.S. manufacturing or reshoring. However, investors can explore small-cap ETFs as a proxy, since these companies often have higher weightings in U.S. industrials and generate a significant portion of their revenue domestically.

ASX options include Global X Russell 200 (ASX: RSSL) and iShares S&P Small-Cap ETF (ASX: IJR) ETFs.

#6 - Cash ETFs: The Next Battleground

With nearly US$7 trillion now parked in money market ETFs, issuers are shifting focus to products that offer higher yields than cash—a trend that could gain traction in Australia as the RBA comes into focus.

One example is the Neos Enhanced Income Cash Alternative ETF (NYSE: CSHI), which employs options strategies on short-term U.S. government debt to generate a yield superior to traditional cash investments—a technique typically used on stocks but now applied to cash-like assets.

“In the past, the competition was all about who could lower fees the most—a race to the bottom. Now, issuers have a ‘race to the top’ mentality, with the focus on which issuer can deliver the highest yield," Psarofagis says.

How to play it in Australia?

There are two ETF options designed to provide yields competitive with cash by investing in money-market instruments. These are the iShares Enhanced Cash ETF (ASX: ISEC) and Betashares Australian Cash Plus Fund (managed fund) (ASX: MMKT).

#7 - Leveraged ETFs: The Ultimate Speculative Plays

Lastly, Balchunas and Psarofagis highlight the explosion of leveraged ETFs. While these products initially focused on providing amplified long or short exposure to diversified baskets of securities, they have since evolved into what they call a “degen paradise.”

The range of leveraged products now available is staggering—everything from 3x leveraged gold mining ETFs to single-stock strategies with extreme leverage.

A prime example is the T-Rex 2X Inverse MSTR Daily Target ETF (BATS: MSTZ), which “seeks daily investment results, before fees and expenses, of 200% of the inverse (or opposite) of the daily performance of MSTR.”

So what exactly does that mean? And what is MSTR?

The fund is essentially a 2x inverse play on MicroStrategy (NASDAQ: MSTR), a company that has become synonymous with Bitcoin due to its massive crypto holdings. In fact, MicroStrategy is the second-largest holder of Bitcoin, trailing only BlackRock.

"I think this one has the potential to get decent flows if people bet against the value of Bitcoin," Psarofagis says.

What could go wrong? Plenty. As always, proceed with caution when using leverage.

How to play it in Australia?

The U.S. remains the wild west for leveraged ETFs, but Australia still offers some leverage options.

Two examples are the Global X Ultra Long Nasdaq 100 Complex ETF (ASX: LNAS) and the Betashares US Equities Strong Bear Hedge Fund - Currency Hedged (ASX: BBUS). These funds use leverage to amplify returns or declines from the markets they're tracking.