Active ETFs: The Next Frontier for Active Managers

For years, active management and exchange-traded funds (ETFs) occupied separate corners of the investment landscape. Active strategies were synonymous with traditional mutual funds, while ETFs were seen as the preserve of index tracking and passive exposure. That divide is now dissolving. Regulatory and technological advances have paved the way for active ETFs to emerge as one of the fastest-growing segments of the European fund industry – offering active managers a modern, scalable, and increasingly necessary route to market.

The evolution of the active ETF market

Active ETFs have been part of the U.S. fund landscape for over a decade, but Europe’s progress has accelerated only recently. Historically, transparency rules and operational constraints limited the ability of active managers to run non-index strategies in ETF format. Recent regulatory changes have changed that picture. UCITS rules now permit active portfolio management within ETFs without requiring daily holdings disclosure, removing a key barrier that had kept many active managers on the sidelines.

The shift is attracting increasing attention. According to EFAMA, European UCITS active ETF assets have grown by more than 385% over the past five years, rising 68% in 2024 alone to surpass $55 billion. Forecasts from EY and CACEIS suggest the broader European ETF market could reach between $4.5 and $6 trillion by 2030, with active strategies accounting for a growing share. Janus Henderson projects that active ETFs could exceed $1 trillion by the end of the decade. Alongside European managers launching their first active ETFs, we are also seeing a growing number of established U.S. managers entering the European market – bringing global brand recognition, distribution strength, and a new wave of innovation that is accelerating adoption across the region.

Why active managers are turning to ETFs

For many managers, the appeal of ETFs goes beyond distribution. ETFs combine the flexibility of listed vehicles with the regulatory rigour of UCITS funds, offering daily liquidity, transparency and cost efficiency. Unlike mutual funds, which typically price only once per day, ETFs provide live, continuously updated valuations throughout market hours. This real-time pricing offers investors immediate insight into portfolio value and execution certainty - a key differentiator in fast-moving markets. Investors benefit from tighter spreads and real-time trading, while managers gain access to a broader and more diverse investor base - from wealth platforms and private banks to institutional allocators who now view ETFs as mainstream building blocks.

At the same time, investor behaviour has evolved. End-clients increasingly expect active strategies to be accessible via ETF wrappers, attracted by the combination of transparency, efficiency, and convenience. For managers running established mutual funds or investment trusts, converting to an ETF can unlock new channels of demand and address persistent challenges such as NAV discounts or limited secondary market liquidity.

The advantages of a white-label approach

Launching an ETF remains an operationally complex process, particularly for first-time issuers. The infrastructure required – from regulatory permissions and fund administration to market-making, authorised participant relationships, and ongoing oversight – is substantial. For this reason, many managers are choosing to partner with white-label ETF platforms, which provide a turnkey route to market without the need to build out full in-house capability.

A well-structured white-label platform enables managers to retain full control of investment strategy and branding while outsourcing the regulatory, operational and capital markets framework. It can also offer a cost-effective entry point: removing the need for seed capital, equity commitments or high upfront setup costs. For some managers, it provides a means to incubate an ETF – testing investor appetite and distribution traction before committing to a standalone platform.

A structural shift, not a passing trend

The growth of active ETFs marks a structural evolution in how investors access active management. As transparency norms evolve and digital distribution broadens, ETFs are becoming the preferred delivery mechanism for strategies that once lived exclusively in mutual fund or investment trust wrappers. Active managers who adapt early stand to benefit most – reaching new investors, enhancing liquidity and positioning themselves for the next phase of industry growth.