How do active ETFs work: The ETF buyers’ guide

Overview

Demand for active exchange-traded funds (ETFs) has grown significantly in recent years. Global assets under management are now at USD 565 billion, which is a sharp increase from only USD 122 billion five years ago.¹ This growth is likely to continue. According to the 2022 Global ETF Investor Survey from Brown Brothers Harriman, 39% of investors globally are planning to increase their active ETF allocation. However, in our conversations with clients, we still see many misconceptions about active ETFs. For this reason, we have created this guide to serve as an educational resource.

¹Bloomberg; Data as of 29 December 2023, US & UCITS only.

What is an active ETF?

When looking at active ETFs, it is first important to note that terms such as “ETF”, “passive” and “index” are not synonymous. ETF simply means Exchange Traded Fund, which means an ETF is traded at an exchange regardless of the investment strategy used.

A variety of “engines” or strategies can therefore be placed in the ETF structure to leverage its benefits.

“Active” refers to specific investment decisions, which are designed to achieve specific outcomes, such as outperforming an index (Alpha), generating income, or achieving control in terms of duration, yield or credit quality.

An active ETF provides access to these specific outcomes, all while maintaining the attributes of the ETF structure.

The ETF is just a wrapper and the content itself is independent of the vehicle

Source: J.P. Morgan Asset Management. For illustration purposes only. The ETF aims to replicate the performance of an index however its market price can be different from its net asset value and from the net asset value of the index.

Active ETF overview

Demand for active ETFs

Active ETF assets have grown sharply in recent years. At the end of 2017 the global assets under management were only at 58bn US dollar, growing to 565bn US dollar end of 2023.^.2

²Bloomberg; Data as of 29 December 2023, US & UCITS only.
³Brown Brothers Harriman Global ETF survey 2023.

Demand for active ETFs is growing

Types of active ETFs

The first active ETF was launched in 2008. Since then, a lot of innovation has happened in the active ETF market. There are now 19 ETF issuers offering active ETFs – a number that has tripled over the last five years.

⁴Source: Bloomberg as of 29 December 2023.

Active UCITS ETF: a market overview

Why invest in active ETFs?

Actively managed ETFs in focus

Getting started

Useful information to consider when investing in active ETFs

J.P. Morgan Asset Management: Advancing the potential of ETFs

J.P. Morgan ETFs are rigorously designed to push the boundaries of ETF investing so that investors can build diversified, competitively priced portfolios.

J.P. Morgan Asset Management launched its first UCITS ETF in November 2017. Since then, we have brought many innovations to the ETF market – from our successful Research Enhanced Index Equity strategies which now consists of ten ETFs, to the launch of the industry’s first active China equity and UK equity ETF, as well as a UCITS global equity version of the world's largest ETF.

J.P. Morgan Asset Management is the number 1 provider for active ETFs in the UCITS space and one of the largest globally.⁸ We have also been named “Best Active ETF Provider (USD 500 million +)” by ETF Express and got awarded "Best Active ETF" at the 2023 ETF Stream Awards.

Past performance is not a reliable indicator of current and future results.

⁸Source: Bloomberg as of 31 March 2023.

Source: J.P. Morgan Asset Management, Bloomberg as of 31 December 2023, Funds Europe, ETF Express.

Explore our full range of ETFs

We offer active and passively managed equity and fixed income ETF strategies, covering all major regions, sectors and investment styles.

View our ETF range

Past performance is not a reliable indicator of current and future results.

This is a marketing communication. The views contained herein are not to be taken as advice or a recommendation to buy or sell any investment or interest thereto. Reliance upon information in this material is at the sole discretion of the reader. Any research in this document has been obtained and may have been acted upon by J.P. Morgan Asset Management for its own purpose. The results of such research are being made available as additional information and do not necessarily reflect the views of J.P. Morgan Asset Management. Any forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are, unless otherwise stated, J.P. Morgan Asset Management’s own at the date of this document. They are considered to be reliable at the time of writing, may not necessarily be all inclusive and are not guaranteed as to accuracy. They may be subject to change without reference or notification to you. It should be noted that the value of investments and the income from them may fluctuate in accordance with market conditions and investors may not get back the full amount invested. Past performance and yield are not a reliable indicator of current and future results. There is no guarantee that any forecast made will come to pass. J.P. Morgan Asset Management is the brand name for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. To the extent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal policies. Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our EMEA Privacy Policy www.jpmorgan.com/emea-privacy-policy. This communication is issued in Europe (excluding UK) by JPMorgan Asset Management (Europe) S.à r.l., 6 route de Trèves, L-2633 Senningerberg, Grand Duchy of Luxembourg, R.C.S. Luxembourg B27900, corporate capital EUR 10.000.000. This communication is issued in the UK by JPMorgan Asset Management (UK) Limited, which is authorised and regulated by the Financial Conduct Authority.

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