The ETF market has hit a symbolic turning point: active funds now outnumber passive ones for the first time, marking a sharp break from the industry’s index-tracking origins — even if actively managed assets still account for just a tenth of assets.
Roughly 51% of the nearly 4,300 U.S.-listed exchange-traded funds are ones overseen by fund managers who have more discretion to pick stocks or other securities, eclipsing index-following products for the first time, Bloomberg Intelligence data show. The number of active ETFs has more than doubled in the past five years, from just 23% in 2020.
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It’s another sign of the sea change underway in the $11 trillion U.S.-listed ETF market. Investors have been gravitating toward actively managed strategies, which have absorbed about 40% of industry inflows amid this year’s market turbulence — the highest share ever. To meet that demand, asset managers are launching a record number of new active products, which command higher fees than their passive counterparts.
“It signals a deeper shift in strategy, as issuers increasingly realize that trying to compete head to head with low-cost beta giants is a losing game,” Bloomberg Intelligence analyst Athanasios Psarofagis wrote in a report Monday. “Instead, many are choosing to complement passive building blocks with differentiated, actively managed offerings.”
A boom in leveraged single-stock and derivatives-powered ETFs has helped to power the growth, rather than an uptick in traditional stock- and bond-picking funds. The number of active ETFs could multiply further should the Securities and Exchange Commission allow issuers to launch ETFs as a share class of mutual funds — a decision that industry watchers anticipate could land in the coming months.
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Active ETFs are still a relatively small corner of the market, accounting for just 10% of overall industry assets, even as they’ve taken in a record share of the nearly $462 billion sent to ETFs in 2025, Psarofagis notes. A decade ago they were less than 5% of all assets.
While there’s clearly strong demand for actively managed funds at the moment, it’s possible that many of these freshly launched funds might shutter in the years to come, Todd Sohn of Strategas warns. For example, he estimates that nearly half of the roughly 800 ETFs that focus on either income, buffers or leverage have less than $50 million in assets.
“Clearly, issuers want to be where the growth is, and that is active,” Strategas ETF strategist Sohn said. “But there will be many without either a proper solution — where does it fit? — or without strong enough distribution to compete.”
