Active ETFs shift investment approaches worldwide

Active exchange-traded funds (ETFs) are changing how investors build portfolios, offering more flexibility than traditional passive strategies, according to J.P. Morgan Asset Management.

Active ETFs gain traction as demand shifts

Nearly 40% of global ETF inflows this year have gone into active strategies, driven by product innovation and the ability to package sophisticated solutions within an ETF structure. Stefania Vivarini, an ETF specialist at J.P. Morgan Asset Management, said advisers now have access to a broader range of investment options than when ETFs were mostly passive equity vehicles.

“The rise of active ETFs is another structural trend in this market,” Vivarini said at an industry event in Wollongong. “Now you’ve got so many vehicles available globally, you really have the ability to construct your portfolios as you wish within the ETF ecosystem.”

Active fixed income ETFs, in particular, are becoming a key tool for advisers, providing access to a wider investment universe than passive bond strategies. Vivarini noted these funds also improve liquidity and price discovery, especially during market volatility.

Income strategies adapt to regulatory changes

Demand for income-focused ETFs is growing as advisers prepare for the phase-out of bank hybrids over the next few years. Vivarini said derivative income strategies allow investors to combine liquidity with attractive yields while staying in listed markets.

“What we’ve done is take these two challenges and put them into an ETF to deliver a high-yielding but still very liquid portfolio,” she said.

J.P. Morgan Asset Management currently offers 14 active ETFs in Australia, covering global equities and fixed income, with an Australian equity ETF expected to launch soon. The firm spends over $525 million annually on global investment research, reinforcing its focus on active management.

“We’re an active house, we believe fundamentally in active research, and our product offer is informed by a really deep and thorough research function,” Vivarini said.

This shift reflects a broader industry trend where active strategies are no longer confined to traditional mutual funds. While passive ETFs still dominate in terms of assets under management, the rapid growth of active ETFs suggests investors are increasingly willing to pay for active management—if it comes with the transparency and trading flexibility of an ETF.

The rise of these products also coincides with regulatory changes in Australia, where advisers are adjusting to new capital requirements that could reshape income investing. The ability to access active strategies through ETFs may help bridge the gap as traditional income sources evolve.