The recent wave of active ETF product development in the US ETF industry has been backed by outsized flows to such products, underscoring the opportunity for issuers according to Cerulli Associates.
The firm writes that both ETF issuers and asset managers must continue to adapt their distribution structures and coverage models to meet the current demand and growth in active ETF product development.
Active ETF assets ballooned to USD1.17 trillion as of 2Q 2025 compared to just USD71 billion in 2018, the firm says. In the first half of 2025, active ETFs saw net flows of USD197 billion, on pace to shatter the USD279 billion in flows for the entire year in 2024.
Sustained growth in active ETF flows has been buoyed by new managers launching products, more legacy mutual fund managers branching out into the active ETF realm, and longstanding ETF issuers expanding their product lineup beyond its original passively dominated menu of strategies.
“There is particular emphasis on product development within the transparent active segment,” says Kevin Lyons, senior analyst. “87 per cent of ETF issuers tell Cerulli they are currently developing transparent active ETFs, and 50 per cent of ETF issuers plan to convert at least one mutual fund into a transparent active ETF, taking advantage of the benefits of an ETF wrapper (lower costs and better tax efficiency).”
A separate industry initiative is that of dual-share-class product—a structure that, pending regulatory approval, would likely become an important arrow in the quiver for delivering active ETF solutions, Cerulli says.
As use and development of active ETF products grows, ETF issuers are working to address perceived obstacles in their distribution models, Cerulli writes.
According to Cerulli, 71 per cent of ETF issuers agree that it is difficult to attain shelf space for active ETF product on broker/dealer platforms, and 58 per cent agree that advisers require additional education on the use of active ETFs.
“Asset managers and ETF issuers recognise that an important path to future success is the ability to effectively position themselves in the market to best align with the demand for active ETFs,” says Lyons. “As development of active ETFs progresses, ETF issuers will need to maintain collaboration with wealth management teams to boost product placement, enhance educational resources, and tackle potential challenges for successful distribution,” he concludes.
