Exchange-traded funds used to be synonymous with passive investing, but that has changed with the rise of actively managed ETFs.
Active ETFs are run by managers or management teams that select securities to buy. Most aim to achieve better risk-adjusted returns than their benchmarks, but many funds have fallen short. Still, active management may have a leg up in certain areas of the market.
Active ETF launches have ballooned since a 2019 regulatory change, known as the “ETF rule,” streamlined the Securities and Exchange Commission approval process. Nearly 1,800 new active ETFs have hit the US market in the last six years. Investors have also bought in to the idea of using active ETFs. At the start of 2019, active ETFs made up just over 2% of the US ETF market. So far in 2025, active ETFs have accounted for 36% of ETF inflows.
2025 Active ETF Flows by Morningstar Category
As active ETFs continue to grow, what should investors know about them?
We’ve assembled this guide to active ETFs to help investors navigate this rapidly evolving space. From overall trends to fund picks, our analysis gives investors what they need to make informed decisions that align with their investment goals.
Understanding the Active ETF Landscape
The growth of actively managed ETFs is largely thanks to the advantages over mutual funds that have spurred the growth of their passive counterparts—low fees, tax efficiency, transparency, and trading flexibility. But active ETFs have their fair share of drawbacks that investors should consider.
Read our analysts’ insights into the landscape of active ETFs:
Many highly respected, successful asset managers—Vanguard, Fidelity, T. Rowe Price, and Capital Group, among them—are launching active ETFs or converting existing actively managed mutual funds into actively managed ETFs.
How to Evaluate Active ETFs
Choosing an active ETF requires more than picking the one with the lowest expense ratio. Several factors can determine a fund’s success or failure, including its strategy; the liquidity, scalability, and diversification of its holdings; and how efficient it is at tax management.
Learn what to consider when investing in active ETFs:
Top-Rated Active ETF Picks
Not all active ETFs are alike. As a group, actively managed funds haven’t done a very good job of beating their indexes, but some active managers have outperformed. Plus, there are certain pockets of the market—particularly among non-US stocks and bonds—where it might make more sense to be active.
Learn where our analysts see opportunity among active ETFs:
3 Promising Bond ETFs to Keep an Eye On
More on ETF Investing
Active management isn’t for everyone, but ETFs still offer potential advantages over mutual funds that investors should consider. Learn more about ETF investing:
