Actively managed exchange-traded funds have become a dominant force in portfolio construction, capturing roughly 38% of all ETF inflows in the first half of 2025, according to mid-year data from J.P. Morgan Asset Management. That translates to about $450 billion in net flows, a sharp rise from the 9% share active strategies held in 2021. The shift reflects a broader evolution in how advisors blend passive building blocks with active solutions to meet client goals.
“It’s no longer an active versus passive story,” said Julie Guntz, global head of ETF strategy and partnerships at AllianceBernstein. “It’s how do we use passive core building blocks along with active solutions to create portfolios for our clients.” This sentiment echoes across the industry, as advisors increasingly turn to active ETFs for targeted exposure, particularly in crowded areas like artificial intelligence.
Jon Maier, chief ETF strategist at J.P. Morgan, highlighted the role of active management in navigating the AI trade. “Certain companies are overvalued, particularly on the AI spectrum, from hyperscalers to infrastructure and semis,” he said. “Finding those individual companies with better valuations that are leveraging their capex spending—that’s what an active manager can do.” This precision is a key selling point for active ETFs, which now account for about 12% of the $16 trillion U.S. ETF market.
Derivative income ETFs have been a major growth driver. These funds, which use options strategies to generate yield, have swelled to roughly $180 billion in assets under management, with a compound annual growth rate exceeding 70% since 2021, according to Morningstar. J.P. Morgan’s JEPI and JEPQ funds are among the most popular, with JEPI offering about 60% of the S&P 500’s volatility and a yield near 8%. The category’s success has attracted new entrants, including Goldman Sachs, which in August agreed to acquire NEOS, a $30 billion active ETF manager known for its options-based funds.
The regulatory environment has also fueled growth. The SEC’s 2019 Rule 6c-11 streamlined the approval process for active ETFs, and their share of total ETF assets has climbed from 2% then to nearly 13% today, according to Scott Davis, head of ETFs at Capital Group. Capital Group, which manages $157 billion in ETF assets—all actively managed—sees this trend persisting. Research from the firm shows that 45% of Gen Z, millennial, and Gen X investors are more likely to work with a financial professional who incorporates active ETFs.
“Many advisors are looking to scale their practices and gain efficiency by leveraging model portfolios, and ETFs are a great ingredient,” Davis said. “It gives the advisor more time to spend with clients and the ability to grow their practice.” This operational benefit, combined with the flexibility of active strategies, is driving adoption across the advisor community.
Looking ahead, J.P. Morgan projects the U.S. ETF market will reach $25 trillion by 2030, with global fixed-income ETFs nearly doubling from $3.6 trillion to $7 trillion. Municipal bond ETFs are a growing segment, particularly as tax-conscious investors seek yield. “Fixed income continues to grow, especially active fixed income,” said Guntz, noting increased conversations around AllianceBernstein’s muni ETF lineup.
However, the expanding ETF marketplace—now with about 420 providers—is facing new cost pressures. Fidelity has implemented service fees that can take up to 15% of a fund’s annual revenue, and more recently, it has imposed a 5% surcharge on trades for ETFs whose providers don’t pay placement fees. The number of affected ETFs tripled from 28 to 97 between November 2025 and August 2026. Schwab, the leading RIA custodian, is also introducing platform fees starting early next year. These changes are prompting asset managers to reassess distribution strategies, as the ETF market's rapid growth brings new infrastructure costs.
For advisors, the takeaway is clear: active ETFs are no longer a niche product but a core tool for portfolio construction. As advisors weigh liquidity and structure fit, the blend of passive and active strategies is becoming the new standard. The trend also aligns with broader shifts in the advisory industry, where AI is reshaping roles but trust and judgment remain paramount. With fee dynamics evolving, the next few years will test how effectively the industry balances innovation with cost efficiency.
