Actively Managed ETF Assets Soared 37% in 2023

While active funds' assets jumped last year, they are still only 6.6% of the more than $8 trillion in U.S. ETFs.

Growth in assets in actively managed ETFs outpaced their passive counterparts last year as investment advisors increasingly turn to ETFs as their preferred investment vehicle. 

Assets in actively managed ETFs grew 37% in 2023, while passive ETFs only grew 8%, according to the yearly flows report from Morningstar Inc. In the equity section of active ETFs, the growth rate was even stronger at 48%.

“There’s growing interest in actively managed ETFs both inside and outside the U.S.,” the report's author, senior product manager of Morningstar Sylvester Flood, told etf.com in an interview. “Advisors really like to use ETFs in their practices, and I think that actively managed ETFs are easier to sell to their clients than active mutual funds.” 

As advisors increasingly turn to ETFs as low-cost, effective strategies for broad market exposure, many are favoring active ETFs over traditional active mutual funds. Still, active ETFs have a long way to go to surpass the assets in passive funds. ETF issuers JPMorgan and Dimensional were the asset managers that saw the biggest boon from flows into active strategies. The JPMorgan Equity Premium Income (JEPI) brought in $12.8 billion, making the fund last year’s largest actively managed equity ETF globally, according to Morningstar. The Dimensional U.S. Core Equity 2 (DFAC) was the second largest actively managed equity ETF of 2023 with about $4.2 billion in net flows.

“ETFs have a kind of halo around them and it just speeds things up for a lot of investment advisors,” Flood said.

Active vs. Passive ETFs

Investors favored passive strategies for their fixed-income fund picks in 2023. Passive index funds brought in $361 billion, which accounted for 91% of the flows into fixed income funds last year, according to Morningstar.

Yet active strategies in bonds recovered modestly from 2022 carnage when outflows hit $747 billion. Last year, active fixed income funds had positive inflows of $34 billion.

Overall, active ETFs have total assets of $549 billion in 1,349 different products in the U.S. markets, about 6.6% of the $8.3 trillion U.S. listed ETFs total, according to etf.com.

 Contact Lucy Brewster at [email protected].