A quiet revolution in the ETF industry is reshaping the investment landscape. This isn’t financial fiction, but a structural shift already underway.
Ambitious? Yes, probably. The ETF market took years to establish itself as the most cost-effective alternative to traditional active management. In Italy, retail investors are only now beginning to embrace these instruments: low costs, immediate diversification, transparency, simplicity. Yet, as financial literacy continues to improve, a new phenomenon is already emerging.
Active ETFs: a new category poised to redefine the very notion of passive investing. And the most surprising thing? In the United States, the number of active ETF launches is expected to surpass passive ones in 2025.
But what are we really talking about?
Active ETFs: the new frontier of management
Caution: we’re not taking anything for granted. To understand the novelty, it’s important to distinguish between passive ETFs and active ETFs.
A traditional (or passive) ETF mechanically replicates an index, such as the S&P 500 or the MSCI World. It makes no active investment decisions or security selection: it simply follows the composition of the index and replicates its performance, minus costs.
An active ETF, however, introduces an element that breaks this rigidity: the manager’s discretion. It is a fund listed on the exchange like a traditional ETF, but within it there is a management team that actively selects securities based on criteria that can be adjusted over time. In other words, it is a compromise between active management and the flexible and transparent structure of an ETF.
In the United States, this trend has already gained strong momentum. Firms such as JPMorgan, Dimensional, T. Rowe Price, and Capital Group have launched active ETFs that have already attracted billions of dollars in assets. Their penetration is growing exponentially, and in 2024, new active ETF launches outpaced passive ones..
Europe is late to the game (but it will get there)
In Europe, the situation is still much more conservative.
When we talk about "active management," our thoughts immediately turn to bank-distributed mutual funds, SICAVs, and balanced portfolios. ETFs, on the other hand, are still perceived as "new" instruments.
Yet even here, signs of change are beginning to emerge. Companies like Franklin Templeton, Fidelity, and ARK Invest have already brought active ETFs to Europe with strategies targeting specific segments, such as corporate bonds, emerging markets, or niche asset classes.
Where active ETFs can really make a difference
This isn’t a complete revolution, however, and it would be naive to think that traditional ETFs will disappear. On the contrary, they will likely continue to represent the core of most portfolios, especially in large, global, and highly efficient market segments, such as major European equity markets or the S&P 500. There, active management has little chance of adding value, because these markets are highly efficient and information is broadly symmetrical.
Active ETFs, on the other hand, can have a significant impact in more specialized segments:
- Small and mid-caps, where inefficiencies are more pronounced and stock selection can generate alpha;
- Bond markets, especially high-yield and emerging market debt, where credit risk assessment is complex, and active management can add value;
- Factor and thematic strategies, which combine quantitative, technical analysis, or sentiment approaches with qualitative stock selection consistent with specific trends.
In these areas, the flexibility of an active ETF can be beneficial, offering a balanced middle ground.
Traditional ETFs aren’t disappearing, they’re evolving
It’s important to clarify one thing: there’s no clear winner. Passive ETFs won’t be replaced. Indeed, their growth appears set to accelerate, thanks to the enormous structural advantages they offer: liquidity, tax efficiency, and ease of use. Their assets under management (AUM) are likely to continue growing, especially for core strategies — those tracking broad markets, global indices, or major asset classes.
Active ETFs, on the other hand, could also fill spaces where pure replication isn’t enough, where the manager’s value can still make an impact: market niches, complex bonds, multi-factor strategies, or more sophisticated risk-management approaches.
In this sense, rather than a replacement, it’s a natural evolution.
An evolution, not a revolution
We’re witnessing a paradigm shift, but not a complete disruption. Traditional ETFs won’t disappear, because they represent the foundation for building any efficient portfolio. Active ETFs will complement them, offering greater flexibility and customization for investors navigating increasingly complex market environments.
The real transformation will be cultural: a shift from the concept of "replication" to that of smart replication, in which the active component doesn’t replace, but complements, the passive component.
Original article published on Money.it Italy 2025-10-26 18:21:00. Original title: È la fine degli ETF classici. Saranno sostituiti da questa categoria
