Actively managed ETFs: A new chapter for global investors

As investors seek active decision making combined with the efficiency, liquidity, and transparency of ETFs, actively managed ETFs are fast becoming core portfolio tools globally. Explore what’s driving this shift—and the implications for portfolio construction and implementation decisions.

Actively managed ETFs, or active ETFs—were once a small sub-set of the global ETF universe. But now, as investor needs broaden and the role of the ETF wrapper expands, active ETFs are attracting growing attention and inflows.

An active ETF combines two distinct components:

• The structure: Exchange-traded, intraday pricing, supported by primary-market creation/redemption
• The engine: A portfolio constructed through manager judgement or an active model, rather than index replication

This distinction matters. The ETF wrapper governs implementation mechanics, transparency, and operational efficiency. The investment process governs outcomes.

As institutional governance standards evolve—with increased scrutiny on liquidity, transparency, cost control, and implementation precision—the wrapper itself has become strategically relevant.

Global ETF adoption is on the rise

The overall ETF ecosystem is experiencing sustained net inflows across markets, but active ETFs have been a notable driver for growth: despite representing only 10% of global ETF assets, active ETFs captured approximately 27% of global industry flows in 2025.¹ Global ETFs overall attracted US$2 trillion in net inflows in 2025, a new record for annual ETF demand,²  and the industry has now seen nearly seven years (79 consecutive months) of positive net inflows.³

While passive index trackers continue to account for the majority of ETF assets, actively managed strategies are emerging as one of the fastest‑growing segments of the market:

• After record inflows of US$332 billion in 2024, global active ETFs captured US$541 billion in 2025, marking the 69^th consecutive month of positive flows for the segment⁴
• Global active ETF assets reached approximately US$1.8 trillion in 2025, reflecting a 56% compound annual growth rate (CAGR) over the past three years (Figure 1)⁵

This momentum is increasingly visible beyond the US as investors globally seek the flexibility of active management combined with the efficiency of the ETF structure.

Active ETF adoption globally: Not just a US story anymore

While the US has led ETF adoption historically, other regions are now demonstrating meaningful momentum:

• European-listed ETFs set a new all-time high of US$3.22 trillion in assets at the end of 2025, with record annual inflows of US$396.84 billion—a continuation of multi-year growth across markets⁶
• Europe’s contribution represented approximately 16.8% of global ETF inflows in 2025, up from around 14% the prior year⁷
• Europe saw hundreds of new ETF launches in 2025, including many actively managed products, even as Asia-Pacific (APAC) markets also contributed launch activity and flows⁸
• APAC ETF inflows, while smaller on an absolute scale than the US and Europe, showed strong relative growth—pointing to increasing product availability and investor demand in those markets⁹

In short, ETF adoption is spreading beyond traditional core markets, and active strategies are part of that movement.

Actively managed ETFs: A global expansion, with regional nuances

Active ETFs have grown in tandem with the broader ETF industry and are expanding beyond the US, notably in Europe and APAC. Over the past five years, active ETF assets in the US have grown at a 47% CAGR, while ex‑US assets have expanded at a strong 34% CAGR as adoption accelerates across regions.¹⁰ This growth demonstrates the increasingly global reach of actively managed ETFs (Figure 2).

Actively managed ETFs are no longer primarily a US phenomenon—they are increasingly part of product lineups in Europe, APAC, and other markets. Key themes in global adoption of active ETFs include:

1. Increasing product numbers worldwide
   Actively managed ETFs now trade on 46 exchanges in 36 countries, illustrating how the product format has expanded well beyond North America.¹¹ Over the past five years, the number of global active ETFs has quadrupled, surpassing 4,000 products worldwide (Figure 2).
2. Rising flows across asset classes
   Actively managed equity and fixed income ETFs both saw strong demand in 2025, with the latter gaining prominence as investors sought yield and risk management tools in a complex interest rate environment.¹²
3. Europe and APAC as growing sources of demand

• In parts of Europe, active strategies are being introduced alongside traditional index products to meet demand from both institutional and retail investors¹³
• APAC (excluding Japan) ETF assets more than tripled between 2019 and 2023, with actively managed products among the faster-growing segments—albeit from a smaller base¹⁴
  

Beyond headline asset growth, regional differences are also evident in how investors are using active ETFs across asset classes:

• Within equities, income and outcome‑oriented strategies have emerged as a meaningful pillar of the active ETF ecosystem, particularly in the US, where they represent 21% of active equity ETF assets (US$192 billion) and have expanded rapidly, growing at a 101% CAGR over the past five years.¹⁵ This growth has been driven in part by strong demand for derivative income strategies, which accounted for US$54 billion of inflows in 2025—the largest share of all active ETF flows in the US last year—and represent a sizable portion of the broader income/outcome category.¹⁶
  
  Outside the US, income/outcome strategies account for a smaller 11% share of active equity assets (US$15 billion) and have grown at a still‑robust 34% CAGR, pointing to a less mature but steadily accelerating adoption curve globally.¹⁷

• Fixed income positioning also reveals clear regional nuances. In the US, active fixed income ETF assets are most heavily concentrated in short‑duration and cash‑like strategies (29%, or US$139 billion), followed by US core bonds (25%) and securitized exposures (13%), underscoring a focus on liquidity management, duration control, and capital preservation.¹⁸
  
  Outside the US, adoption skews toward more globally diversified exposures. Global core strategies represent the largest share of active fixed income ETF assets (26%, or US$23 billion), followed by short‑duration and cash‑like strategies (25%) and investment‑grade credit (19%).¹⁹ Together, these patterns highlight differing use cases across regions, with US investors emphasizing implementation efficiency and cash management, while ex‑US investors increasingly use active ETFs as vehicles for core, globally diversified bond allocations (See Appendix I for a detailed breakdown of active ETF assets by category and region).

Why are active ETFs gaining traction?

The rise of active ETFs is largely driven by three interrelated forces:

1. Investors still value active decisions

Even as passive investing has grown, many investors still see the value in the role that active management can play in portfolios—particularly in markets where inefficiencies or rapid change can create opportunities for skilled managers.

Fund surveys suggest a high level of investor interest in increasing active ETF exposures in the near future, with many allocators planning to expand use of active strategies.²⁰

This desire is not limited to one region—global institutions, consultants, and advisors are thinking pragmatically about what the ETF wrapper enables.

2 The ETF wrapper brings operational benefits

Active ETFs combine two attributes:

• Manager discretion—the ability to adjust portfolios based on research, systematic factors, or market conditions
• ETF structure advantages—tradability, intraday pricing, potential tax efficiency and transparency

In many cases, that combination supports implementation goals such as:

• Efficient transition management
• Tactical allocation adjustments
• Access to certain fixed income exposures
• Transparent risk monitoring

This structural appeal is especially compelling for investors who want active insight with enhanced operational flexibility.

3 Portfolio construction is shifting from “benchmark vs. alpha” to “outcome vs. risk”

The binary framing of passive versus active has given way to a more nuanced question: what role does a strategy play to achieve portfolio objectives?

Investors are increasingly using active ETFs to:

• Target specific risk characteristics rather than benchmark outperformance
• Complement core beta allocations
• Serve as tactical or completion sleeves (e.g., a supplement to a core holding)
• Provide more granular building blocks within model portfolios

To realize these goals, a wider array of actively managed ETF strategies are increasingly available globally—from traditional equity and bond products to more targeted approaches like sector ETFs or income-oriented exposures. Institutional and retail markets alike are seeing active ETF innovation.

4 Fixed income complexity and the case for active management

The case for active ETFs is particularly visible in fixed income. Bond markets are fragmented, issuer dispersion is wide, and liquidity varies significantly across instruments and market regimes. These factors make security selection, portfolio construction, and trading judgement critical to outcomes.

Investor behavior reflects this reality. Global active fixed income ETFs have grown nearly to US$560 billion in assets, marking a 46% CAGR over the past three years.²¹ In 2025, active strategies attracted 35% of all fixed income ETF flows, despite accounting for only 19% of assets,²² highlighting strong investor demand for active judgement in credit selection, duration management, and liquidity management.

Performance outcomes further reinforce the case for active management in core bond allocations. In 2025, 57% of active core fixed income managers outperformed their benchmarks. By contrast, in the equity market’s core category—large blend strategies—only 28% of active managers outperformed.²³

This gap highlights a key distinction between asset classes. While equity markets tend to be more efficient and centralized, fixed income markets offer greater scope for skilled managers to add value through security selection, curve positioning, and risk management.

For institutions, this reflects a structural need. Active fixed income ETFs can provide a scalable way to access alpha potential at the core of portfolios, combining manager discretion with the transparency, liquidity, and implementation efficiency of the ETF wrapper.

What this means for strategy and implementation of active ETFs

For global investors, the rise of active ETFs changes the shape of implementation rather than the fundamentals of investment philosophy.

Institutions globally are operating in an environment with some combination of higher macro volatility, regime uncertainty, and/or tighter governance oversight. The ability to adjust exposures efficiently—intra-period, during transitions, or alongside liability-aware adjustments—has become more valuable.

The ETF format provides intraday tradability and exchange access, potentially simplifying operational workflows compared with some traditional pooled vehicles. For institutions managing multi-manager structures or cross-asset overlays, this can be a meaningful consideration.

Active management within the ETF delivery format creates practical implications:

• More modular portfolio construction: Allocators can combine core passive exposures with active sleeves tailored to specific outcomes
• Improved implementation efficiency: Better alignment between liquidity needs, trading flexibility, and governance expectations
• Expanded choice: More product options empower investors to express nuanced views without sacrificing the benefits of exchange-traded access