We’ve all seen the media stories and reports that active ETFs are quickly becoming the go-to way investors build their portfolios. After all, the ETF structure has taken the best of active management and only enhanced it, providing low-cost alpha generation to portfolios. And with new sectors and strategies being packaged into active ETFs, their growth is assured.
Need proof? Just take a look at fund launches.
Active ETF launches have surpassed passive ones, and inflows have continued to remain swift. This implies investors are gobbling up these new funds. With the sector continuing to break records, the active ETF revolution is here to stay.
Active Changes The Game
ETFs created a structural change in the investment management industry and how we all build portfolios. Thanks to their various benefits, lower costs, and potential tax savings, ETFs quickly become advisor and investor favorites when building a portfolio’s asset allocation.
Passive funds were the real driver of this change. Investors devoured broad index funds that offer core exposure for pennies on the dollar. Today, most of us use broad passive funds as the cornerstones of our allocations.
Active ETFs played second fiddle during this growth. In the early days, there were only a few active ETFs around. They were expensive, featured low trading volumes, and were primarily used for alpha generation in themes or broad asset classes.
But once the SEC changed the rules in 2019, it was off to the races. And today, active ETFs are starting to pull ahead when it comes to fund launches and asset gathering.
Active Outpaces Passive
According to Morningstar, during the first six months of this year, 476 active ETFs debuted across Europe and the United States. To put that into context, 565 active ETFs launched for the whole of last year. And passive index funds? Morningstar data shows that there have only been 234 launches so far this year and 504 for all of 2024.
All of that launch activity has done something unthinkable. Active ETFs on the market now outpace the number of passive ones. By the end of June, there were 2,226 active ETFs available on major exchanges in the U.S. This is versus the 2,157 available passive ETFs. This chart from Morningstar shows the parabolic jump for active ETFs in a very short time. 1
Source: Morningstar
What’s more is that investors are starting to embrace these active funds with their dollars.
Index ETFs still dominate when it comes to AUMs- accounting for roughly $13 trillion in terms of assets across Europe and the U.S. Active ETFs only account for about $1.2 trillion. Where it gets interesting is that inflows for passive ETFs have started to trickle lower and stay steady, while the pace of active inflows has surged. Morningstar data again shows that 37% of all new money has flown into active ETFs. Looking back a decade ago, only 3% of new money flowed into active ETFs. This has helped drive active ETFs to be 10% of the overall ETF marketplace. 2
Active ETF Growth Is Here To Stay
Investors have embraced active ETFs for their portfolios. And why not? The structure enhances many of the “wins” of active management and ultimately allows for outperformance and additional alpha generation.
The best part is that the future looks rosy for active ETFs and their continued dominance.
Part of the reason is just how investors are using active ETFs in their portfolios. Morningstar notes that the rise of outcome ETFs- that use derivatives, options, and buffer strategies- is quickly becoming the largest gathering of assets. Moreover, many model portfolio makers have started to use active ETFs in their allocations as additional ways to improve returns, bet on themes, and find growth. Finally, active fixed-income ETFs are quickly becoming the number one way investors build bond portfolios. With so many issues to bond index construction now known by the investing public, active management and its ability to outperform have been sought out by advisors and investors.
And with enhanced indexing and systematic investing taking hold, the number of launches and active ETF activity is set to explode.
Popular Active ETFs
These ETFs are sorted by their YTD total returns, which range from -2.7% to 7.8%. They have expense ratios ranging from 0.17% to 0.36% and assets under management between $5 billion and $30 billion. They are currently yielding between 0.8% and 9.7%.
| Ticker | Name | AUM | YTD Total Ret (%) | Yield (%) | Exp Ratio | Security Type | Actively Managed? |
|---|---|---|---|---|---|---|---|
| JEPQ | J.P. Morgan Nasdaq Equity Premium Income ETF | $5.58B | 7.8% | 9.7% | 0.35% | ETF | Yes |
| DFUV | Dimensional US Marketwide Value ETF | $8.5B | 6.2% | 1.5% | 0.21% | ETF | Yes |
| DFAC | Dimensional U.S. Core Equity 2 ETF | $20.9B | 5.7% | 0.8% | 0.17% | ETF | Yes |
| JEPI | JPMorgan Equity Premium Income ETF | $29.2B | 4.1% | 7.4% | 0.35% | ETF | Yes |
| MINT | PIMCO Enhanced Short Maturity Active ETF | $9.7B | 2.1% | 5.3% | 0.35% | ETF | Yes |
| JPST | JPMorgan Ultra Short Income ETF | $22.8B | 1.7% | 5.2% | 0.18% | ETF | Yes |
| AVUV | Avantis U.S. Small-Cap Value ETF | $6.7B | 0.80% | 1.4% | 0.25% | ETF | Yes |
| DFAT | Dimensional U.S. Targeted Value ETF | $8.2B | -0.4% | 0.8% | 0.28% | ETF | Yes |
| FBND | Fidelity Total Bond ETF | $5.1B | -2.7% | 4.9% | 0.36% | ETF | Yes |
The caveat to all of this is that just because there are this many funds, it doesn’t mean that we should indiscriminately buy active ETFs for the sake of doing so. Fund flow data continues to support the idea that there are mega-sized active ETFs and those with hardly any assets. While this could change, so far, it hasn’t. So, investors still need to be cautious and do their homework when it comes to buying an active fund.
The win is that they now have more choices to build their portfolios and create better outcomes. Active ETFs and their growth have been a significant transformational change in how we build portfolios and meet our goals. With launch activity rising and assets growing, investors are the ones who win out.
Bottom Line
Active ETF launches and growth have been moving at a blistering pace. That trend should continue as more investors take a shine to the fund vehicle. In the end, the growth is a win for investors and portfolio construction. More tools ultimately mean better outcomes.
1 Morningstar (July 2025). Our 2025 ETF Predictions: A Midyear Review
1 Morningstar (August 2025). Active ETFs Brought in Record $44.8 Billion in July
