Active ETFs are punching well above their weight. Despite representing roughly 13% of total ETF assets under management, actively managed exchange-traded funds are now capturing more than four out of every ten dollars flowing into the ETF market, a sharp increase from 26% in 2024. The shift reflects a broader migration: active portfolio management, long housed mostly in mutual funds, is being repackaged into the ETF wrapper at a rapid pace.

The numbers behind the boom

In 2025, active ETFs posted record inflows of approximately $450 billion to $460 billion. That accounted for roughly one-third of the $1.46 trillion in total ETF flows for the year, a notable rise from their 26% share in 2024.

By 2026, active ETFs are capturing approximately 38% of total flows, according to data from JPMorgan. US-listed ETF inflows overall are projected to surpass $2 trillion this year, with more than 35% expected to go into active strategies.

The total ETF market stands at roughly $16.1 trillion in assets under management. Active funds manage about 13% of that total. Active ETFs have also accounted for more than 80% of new ETF debuts. As of mid-2026, actively managed ETFs have recorded 74 consecutive months of positive inflows globally.

Why the shift is happening now

The appeal of active ETFs comes down to several converging factors. First is tax efficiency. The ETF structure uses an in-kind creation and redemption mechanism that allows fund managers to avoid triggering capital gains distributions, a recurring pain point for investors in actively managed mutual funds, which routinely pass realized gains on to shareholders. Second is transparency and liquidity. ETFs trade throughout the day on exchanges, giving investors real-time pricing and the ability to enter or exit positions without waiting for end-of-day NAV calculations.

A regulatory unlock also helped. In 2019, the SEC approved structures that allow active ETFs to shield their daily holdings from full disclosure, addressing a long-standing objection from active managers who feared that publishing every trade would invite front-running. That decision helped open the format to traditional stock-picking firms. At the same time, actively managed mutual funds have seen years of sustained outflows as investors favor cheaper, more tax-efficient vehicles, prompting asset managers to bring active strategies to market in ETF form, in some cases by converting existing mutual funds outright, the route Dimensional took when it moved several of its funds into ETFs starting in 2021.

The firms benefiting from this trend are familiar names. JPMorgan, Dimensional Fund Advisors, Capital Group, First Trust, and American Century rank among the top active ETF issuers by flows and assets under management. JPMorgan’s JEPQ, an equity premium income fund focused on Nasdaq-100 stocks, has attracted billions in inflows since launch and has become one of the category’s best-known products.

What this means for the fund industry

Active ETFs often charge less than their mutual fund equivalents, partly because the ETF structure is cheaper to operate and partly because competition in a crowded launch environment pressures providers to keep prices in check.

With active ETFs now outnumbering passive funds in new launches, the competitive landscape is becoming increasingly crowded. The likely winners are firms with established distribution networks, strong brand recognition, and the ability to deliver consistent performance relative to benchmarks.

The signposts worth watching from here are concrete: whether the category’s monthly inflow streak extends, whether active ETFs continue to capture a share of launches and flows well above their 13% asset base, and whether fee competition intensifies as more issuers chase the same dollars.