Active ETFs Surge in Popularity, Driven by Investor Appetite for Flexibility and Transparency

Investor appetite for active ETFs is accelerating globally, with European inflows nearly tripling year-over-year from 2023 to 2024. AXA Investment Managers' Olivier Paquier attributes this growth to active ETFs offering the transparency and accessibility of ETFs with the flexibility of active management. ESG, low tracking error, and risk-managed strategies are gaining traction in Europe, and Paquier expects more innovation and deeper product offerings in fixed income and higher tracking error strategies.

Investor appetite for active exchange-traded funds (ETFs) is surging globally, with European inflows nearly tripling year-over-year from 2023 to 2024. According to Olivier Paquier, global head of ETF sales at AXA Investment Managers, this growth is driven by active ETFs offering the transparency and accessibility of traditional ETFs, combined with the flexibility of active management [1].

Active ETFs have been gaining traction in various areas, including environmental, social, and governance (ESG) strategies, low tracking error, and risk-managed portfolios. The demand for these products is not only growing but also accelerating, with a significant shift in investor preference towards actively managed ETFs [2].

In Europe, active ETFs are particularly popular among institutional investors who appreciate the conservative approach of research-enhanced strategies. These strategies allow for small deviations from benchmark holdings, offering a more neutral sector and country exposure [4].

The growth of active ETFs is not limited to Europe. According to BNY Mellon, net sales of active ETFs in the first quarter of 2025 amounted to $9.9 billion, exceeding the $9.4 billion in net sales generated by passive ETFs. This marks a significant acceleration in active ETF flows, with active ETFs accounting for 48% of net ETF flows compared to 25% in the previous 12 months [2].

The shift towards active ETFs is also evident in the performance of specific products. For instance, the Capital Group Dividend Value ETF (CGDV) and the PGIM AAA CLO ETF (PAAA) have shown strong performance, suggesting a growing interest in diversification through investment grade credit with higher yields and lower duration risk [2].

In summary, the accelerating appetite for active ETFs is a global trend driven by the unique combination of transparency, accessibility, and active management. As investors seek more innovative and tailored investment solutions, the market for active ETFs is expected to continue growing, with a particular focus on ESG, low tracking error, and risk-managed strategies.

References:
[1] https://www.etfstream.com/articles/why-investor-appetite-for-active-etfs-is-accelerating
[2] https://www.bny.com/corporate/global/en/insights/distribution-pulse-quarterly-Q2-2025.html
[4] https://lipperalpha.refinitiv.com/2025/06/monday-morning-memo-why-are-active-etfs-accused-of-misleading-investors/