Active ETFs have grown into a roughly $1.5 trillion market and continue to expand at a rapid clip, even as retail private credit braces for at least 12 to 18 months of slow growth or outflows, according to senior executives speaking at the Goldman Sachs RIA Professional Investor Forum in early May.
That’s an important divide for financial advisors. Alex Blostein, asset management senior analyst in global investment research at Goldman Sachs, said wealth management remains one of the fastest-growing sectors in financial services. Product evolution and a focus on after-tax returns are among its biggest drivers
That evolution, Blostein said, is taking the shape of a barbell. Advisors are building portfolios with a liquid, tax-efficient core on one end and a selective reach for illiquid assets on the other, mirroring a shift that reshaped institutional portfolios in previous years.
Traditional asset managers have long faced persistent mutual fund outflows. Active ETFs have reversed that trend, Blostein said, giving managers a way to reach registered investment advisor clients with greater tax efficiency and easier access.
See more: RIA Growth Is Just Getting Started, CEOs Say
The active ETF market has grown organically, at about 50% per year, and now sits at roughly $1.5 trillion, Blostein said. That growth reflects how thoroughly the wrapper has displaced traditional fund vehicles in the wealth channel, offering tax advantages that mutual funds cannot easily replicate.
The story on the private credit side looks different. Blostein said the retail-facing portion of the private credit market amounts to about $200 billion in net asset value, a relatively small slice of the broader industry, but one that has drawn considerable attention from advisors and managers alike.
That attention has cooled. Blostein said the segment will likely see slow growth or outflows for at least the next year to year and a half while the industry works through existing redemption queues.
Marc Nachmann, global head of asset and wealth management at Goldman Sachs, said the slowdown reflects a structural problem in how many retail private credit funds are built. Evergreen vehicles, which give investors a yield from day one, require managers to deploy capital immediately rather than waiting for the right opportunity.
During periods of rapid inflows, Nachmann said, managers were under intense pressure to close deals regardless of market conditions in order to generate the promised yields of 8% to 10%. Drawdown funds, by contrast, allow managers to hold capital and deploy it when conditions are more favorable.
Nachmann said more than 80% of Goldman Sachs’s private credit business is in institutional drawdown vehicles, a structure that allows the firm to step back when markets are expensive and return when valuations improve.
Beyond active ETFs and private credit, Blostein raised a longer-term concern. AI-powered cash optimizer tools could soon automate the movement of client cash into higher-yielding options, threatening a core revenue source for major wealth custodians.
Currently, platforms such as Charles Schwab and LPL Financial derive the vast majority of their profits from net interest income, Blostein said. Sweep accounts typically pay just 20 to 40 basis points to clients, even as market rates sit near 3.5%.
If AI tools move cash at scale into money market funds or short-duration ETFs, custodians may respond by raising custody fees or charging asset managers more for platform access, Blostein said.
Neither Blostein nor Nachmann believed AI would replace human advisors. Nachmann said clients want to speak with a person about their finances, and that relationship goes well beyond basic asset allocation. His focus, he said, is using AI to improve the client experience and investment performance rather than simply cutting costs.
For Goldman Sachs, the pullback in retail private credit inflows has created an opening. Private credit consistently generates about 200 basis points more yield than public credit of comparable quality, Nachmann said. With the marginal retail buyer now out of the market, yields on newly originated private credit deals have risen by about 100 basis points, drawing institutional investors back in.
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