Private capital, active ETFs to continue shake up of financial services: Deloitte

Private capital, active ETFs and tokenisation are set to take the financial services sector by storm over the next three to five years, Deloitte predicts.

Deloitte's 2025 Financial Services Industry Predictions report lays out six major forces that will disrupt investing, starting with the exponential growth in private capital from retail investor demand.

US and European retail investors are expected to pour money into private capital, reaching as much as US$2.4 trillion in 2030 from the current US$80 billion.

This growth is set to be driven by expanding product offerings and regulatory changes that make private capital more accessible to retail investors.

"While a large number of private assets available to retail investors are currently held within interval funds managed primarily by private capital firms, traditional investment managers are turning to structures that retail investors are already familiar with mutual funds and ETFs," Deloitte said.

For example, investment managers BondBloxx Investment Management and Virtus Investment Partners each launched actively managed ETFs with private credit exposure last December.

State Street Global Advisors (SSGA) launched an actively managed private credit ETF in February with the aim to provide all investors with access to private markets by investing in both public and private credit such as asset-based finance and corporate lending.

Deloitte predicts that private capital within mutual funds and ETFs will be up to 15% of illiquid investment allotment and will likely be a driving factor for US retail investors' increased allocation to private assets over the next five years.

More broadly, Deloitte said that investment managers could unlock US$11 trillion in the active ETF space.

Active ETF assets in the US are expected to grow from US$856 billion in 2024 to US$11 trillion by 2035 - a 13-fold increase. This increase is expected to be driven by investors shifting from mutual funds to active ETFs across most institutional and retail investor channels.

Meanwhile, tokenisation is due to transform cross-border payments by 2030.

One in four large-value international money transfers will be settled on tokenised currency platforms, Deloitte said, which could reduce the cost of corporate cross-border transactions by 12.5%, potentially saving businesses more than US$50 billion. Stablecoins appear to be the frontrunner.

"Stablecoins may offer a clear path forward for wholesale cross-border payments in the near term... President Trump has also called on federal agencies to spur the growth of "lawful and legitimate dollar-backed stablecoins" in a January executive order. These measures could foster widespread acceptance of stablecoins and accelerate banks' adoption of stablecoin-based payment solutions," Deloitte said.

Last month, the US Senate Banking Committee passed the Guiding and Establishing National Innovation for US Stablecoins Act of 2025 or GENIUS Act, which will establish the framework for the issuance and regulation of payment stablecoins.