Active ETFs’ Big Year: What Hit the Market and What’s on Our Radar

Active exchange-traded funds created a big buzz in 2024. Here’s a look at what has hit the market and Morningstar analysts’ radar. We now rate more than 120 active ETFs.

While active ETFs have been around for almost two decades, they didn’t take off until a key regulatory change in 2019. The SEC’s Rule 6c-11, commonly referred to as the “ETF rule,” spurred innovation by streamlining the approval process and permitting custom baskets. Last year, 510 active ETFs launched, excluding those created as trading tools, accounting for close to 80% of all ETF launches.

Nearly two thirds of active ETF were equity funds.

In 2024, three firms launched more than 30 ETFs—Innovator with 39, First Trust with 36, and PGIM with 32. Most of these ETFs are buffer ETFs, which fall in the options-trading Morningstar Category. These strategies allow investors to participate in some of the market’s upside while protecting losses up to a certain point, which is known as the buffer. For example, an ETF with a 12 buffer would shield investors from losses of up to 12%. If the market fell any further, investors would incur the difference between the buffer level and the actual loss.

A handful of strategies launched in the fourth quarter of 2024 stand out. MFS entered the fray with five ETFs, and Oakmark launched a similar strategy to its flagship Oakmark OAKMX mutual fund that had fewer stocks but not as few as the concentrated Oakmark Select OAKLX. Fidelity launched five ETFs, four of which were non-US funds. First Trust continued its onslaught with 11 launches in the quarter, mostly buffer ETFs.

Active ETFs took in roughly $290 billion in assets in 2024, with $95 billion coming in the fourth quarter. The top 20 ETFs gobbled up roughly 39% of the assets. Six of J.P. Morgan’s ETFs made it into the top 20, including its two popular equity-income ETFs. BlackRock’s iShares U.S. Equity Factor Rotation Active ETF DYNF, which tries to beat the market by tilting toward factors it thinks are in favor, took the top place this year with more than $11 billion in inflows, in part because the firm added the ETF to several of its model portfolios. One commodities strategy, Invesco Optimum Yield Diversified Commodity Strategy ETF PDBC, which invests in commodity-linked futures and other instruments, made it in the top five, taking in more than $6.5 billion.

Active ETFs in the large-blend, ultrashort bond, and derivative-income categories took in more than a third of all 2024 active ETF inflows.

Five firms—J.P. Morgan, Dimensional, American Funds parent Capital Group, Fidelity, and iShares—took in roughly 50% of all 2024 active ETF inflows. American Century’s Avantis ETF family landed just outside the top five with $16.9 billion of inflows.

It hasn’t been all inflows, though. Five Ark Invest strategies saw more outflows in 2024 than most active ETFs. Its flagship ARK Innovation ETF ARKK had more than $3.1 billion in outflows; the five ARK ETFs saw more than $5.0 billion in outflows. Firms also liquidated or merged away 80 active ETFs in 2024; they should shutter more in 2025 since only one third of active ETFs have more than $100 million in assets, which is a rough breakeven level for funds.