What’s Really Happening With Active ETFs, and Which Ones Are Resonating With Investors

Much has been made about the massive expansion of actively managed exchange-traded funds over the past several years. In some sense, that’s understandable. Asset managers and investors have been migrating toward them.

At the end of June, actively managed ETFs outnumbered their passively managed counterparts by a wide margin. Halfway through 2026, a little more than 2,100 ETFs tracked an index, while more than 3,200 ETFs did not.

However, splitting ETFs by that simple criterion is an outdated way to sort them. It says nothing about the different types of actively managed ETFs or the unique risks that some of them incur. While it’s true that many don’t track an index, it’s also true that many are not overseen by a portfolio manager who’s shrewdly researching and selecting stocks or bonds.

Defining ‘Active’

Sorting ETFs and mutual funds based on whether they track an index is a good start, but it’s only the first step. Asset managers use a wide variety of investment processes among funds that don’t track an index. Some have enduring merit while others are speculative.

Actively managed funds fall into three basic buckets. The first bucket contains funds with fundamental/discretionary active managers, or those that typically come to mind when talking about actively managed portfolios. Primary examples include Fidelity Total Bond ETF FBND or Capital Group Growth ETF CGGR. These ETFs have managers who take the market’s temperature, scrutinize financial statements, and use that analysis to construct a portfolio. In most instances, these managers select and weight stocks or bonds with the goal of outperforming the market or a segment of the market.

The second bucket holds actively managed systematic funds that don’t track an index, but they still use a set of rules to select and weight stocks and bonds for their portfolios. Examples include ETFs from Dimensional Fund Advisors and Avantis Investors. The goal of these funds is often the same as those managed by discretionary active managers. They’re attempting to outperform the market or a segment of the market. But they follow a prescribed set of rules without codifying them in an index, affording themselves greater flexibility than an index fund to trade and change their rules.

The third bucket is a metaphorical junk drawer of ETFs that have a wide range of objectives. These include reengineering an asset’s total return to distribute more income, providing leveraged or inverse exposure to an asset, mitigating all or a portion of a reference asset’s downside, and various combinations of those.

Such ETFs include leveraged and inverse single-stock ETFs, ETFs that advertise astronomical yields of 100% or more, and defined outcome ETFs, among others. They typically employ derivatives to achieve their objective, and some explicitly leverage their exposures. Most lack the basic characteristics that define great long-term investments. They’re best used sparingly, if at all.

Passively managed ETFs can be split into two camps: ETFs in the first group explicitly track an index, while those in the second group track the price movement of an asset by physically holding that asset, like SPDR Gold Shares GLD and iShares Bitcoin Trust ETF IBIT.

Reality Check

Breaking out the number of ETFs in each group and the amount of money invested in each one shows what’s really going on. Indeed, there were 3,211 actively managed ETFs and 2,153 passively managed ETFs trading on US exchanges at the end of June. ETFs in the passively managed index-tracking group had the most ETFs, while the junk drawer and discretionary active groups were close behind in second and third place (by count), respectively.

The number of ETFs in the junk drawer group substantially adds to the number of actively managed ETFs, but they don’t support the idea that active managers are experiencing a renaissance. The ETFs in this group don’t have a manager or team of managers sweating over company balance sheets and macroeconomic forecasts to pick winners, nor are they following a sensible set of rules. Most are speculative, complex, expensive, and struggling to attract investors. The median ETF in this group had just $29 million invested in it.

Furthermore, the amount of money invested in ETFs from each group tells a different story. Passively managed ETFs aside, the junk drawer group represented 44% of all actively managed ETFs but just 17% of the money invested in them. In other words, most of the money invested in actively managed ETFs sits in those run by fundamental managers or ones following a systematic process.

Who’s Winning?

A closer look inside the discretionary and systematic active groups shows what’s really resonating with investors.

Two asset managers dominate the systematic group. ETFs from Dimensional and Avantis accounted for two-thirds of all money invested there. Dimensional’s ETFs, on their own, represented almost 46% of all such ETFs. Gold-rated Dimensional US Core Equity 2 ETF DFAC was the largest actively managed ETF at the end of June 2026, with more than $47 billion invested in it.

The situation is a lot more interesting in the discretionary group. Capital Group and J.P. Morgan manage the largest amount of money, and they have the two largest ETFs. Gold-rated JPMorgan Ultra-Short Income ETF JPST had just under $40 billion at the end of June, while Gold-rated Capital Group Dividend Value ETF CGDV was close behind.

However, Capital Group and J.P. Morgan each represented about 15% of all money invested in discretionary ETFs. The remaining 70% was split across ETFs from a range of asset managers, including BlackRock’s iShares, Pimco, and Fidelity.

A number of familiar active mutual fund managers have smaller ETFs with a lot of potential to grow. T. Rowe Price found some early success with Gold-rated T. Rowe Price Capital Appreciation ETF TCAF and Silver-rated T. Rowe Price US Equity Research ETF TSPA. Vanguard has launched nine actively managed bond ETFs and three actively managed stock ETFs since early 2021. In typical Vanguard fashion, most have near the lowest fees in their categories, and they’ve grown to almost $22 billion halfway through 2026.

There’s a clear story playing out among active ETFs. Large asset managers with ETFs following sensible, repeatable processes and charging relatively low fees have attracted the most money. The huge number of active ETFs is inflated by a lot of small ETFs that are best ignored.

At the end of June, actively managed discretionary and systematic ETFs accounted for about 10% of all ETF assets. How much proportionally bigger they can get is unclear. The passive ETF market is a behemoth that was built over decades. Actively managed ETFs have only started to proliferate over the past five years, and more are on the way.