Active ETFs Approach $1 Trillion in Global Assets

Active ETFs may be about two decades old, but they’re starting to hit their stride.

Global assets in active ETFs are expected to grow to $1 trillion soon, per ETFGI data. The investment vehicles, which try to outperform the market, had reached $974 billion in assets at the end of July, and could soon enter tredecuple — that’s 13 — digits.

Rules of the Game

Active ETFs have all the advantages of regular ETFs — low costs, flexible trading, liquidity — with the added benefit of being actively managed, similar to most mutual funds. The momentum behind active products took off after the Securities and Exchange Commission passed a rule in 2019 allowing ETFs to come directly to market without the cost and delay of obtaining an exemptive order. Currently, there are roughly 13,200 active ETFs globally, and they accounted for 70% of all US-listed launches in 2024 through June, according to BlackRock.

After the SEC ruling, managers flooded into the active space, according to Dimensional Fund Advisors co-head of product specialists Rob Harvey. “It allowed for ETFs to have non-pro rata baskets; you could have custom baskets, which is a game-changer for anyone looking to launch an ETF,” he told The Daily Upside. 

Rules of Engagement. The rule also required ETFs to disclose daily holdings, historical information regarding premiums and discounts, and bid-ask spread information. That transparency has helped make active ETFs more attractive to investors. Active ETFs’ five-year compound annual growth rate of 52% is more than three times the rate for passive ETFs, according to State Street. 

“There is transparency into the underlying holdings, which means transparency into the underlying strategies as well,” said Matt Kaufman, head of ETFs at Calamos Investments. “Historically, a lot of mutual fund managers wouldn’t really disseminate their strategies. There are quarterly holdings reports, but in between that, they could do a lot.”

• Global assets in active ETFs have increased roughly 32% year-to-date, according to ETFGI.
• During July, they gathered net inflows of $36 billion, bringing year-to-date net inflows to $190 billion — the highest on record.
• Some of the biggest players in the active ETF space include Dimensional, American Century Investments, BlackRock, and JPMorgan Chase, whose Global Select Equity ETF has seen its adoption rate among RIAs surge 2,200% in less than a year, according to YCharts.

Feeling’s Mutual: Though mutual funds still contain about $13.8 trillion in assets in the US alone, they have lost some of their staying power with investors. Over the past decade, actively managed equity mutual funds in the US have bled $2.6 trillion in outflows, according to the Investment Company Institute, some of which can be attributed to investors moving money from mutual funds to active ETFs.