In research commissioned by Janus Henderson in mid-2025, 42% of professional investors -- collectively managing around US$800 billion -- indicated they expect the European active ETF market could grow toward US$1 trillion by 2030.

How fast is the European active ETF market likely to grow?

The European active ETF market surged past US$70 billion in assets under management this summer, more than doubling in size since the start of 2024. Active ETFs still only make up 2.7% of the European ETF market, but 74% of professional investors expect this share to hit 5% by the end of next year.

Globally, the pace of growth in the active ETF sector is striking. In the first half of 2025, half of all ETFs launched globally were active according to industry consultancy ETFGI. Looking ahead, nearly 60% of survey respondents expect most ETF launches in 2026 to be active.

"Half of professional investors expect 10% of their ETF allocation will be in active strategies by next year. This is a step change for the industry as a whole and has the potential to meaningfully benefit investors in terms of efficiency and liquidity."

 

 - Michael John (MJ) Lytle, Head of Product Innovation.

Why are "active core" ETFs proving popular?

So far, adoption in Europe has been led by "active core" ETFs, which have a low tracking error to a benchmark and often focus on research enhanced index-based strategies. Most of the investors surveyed (72%) see these ETFs as replacement for their existing index-based passive exposures.

In contrast, uptake of "high-conviction active" ETFs, built on deep fundamental research to develop more concentrated portfolios, has so far been slower. However, 66% of respondents see high conviction active ETFs as potential replacements for traditional mutual fund exposures, suggesting significant runway for growth.

How are investor allocations to active ETFs evolving?

When survey respondents were asked how they see fund allocations to active ETFs changing over the next 12 months, the vast majority (96%) noted that these will increase by between 25% to 75%. The anticipated increases suggest growing confidence in active management strategies. These strategies seek to capitalise on the expertise of fund managers to navigate complex market environments and achieve superior risk-adjusted returns.

This trend underscores the growing importance of active ETFs in modern investment portfolios. As investors continue to seek ways to optimize their portfolios, active ETFs are poised to play a pivotal role in their investment strategies over the coming year.

Why do fixed income and equities lead asset exposure via active ETFs?

A significant 80% of respondents reported having exposure to fixed income via active ETFs while 58% of respondents use active equity ETFs. The survey results underscore a strategic utilisation of active ETFs for achieving diversified investment portfolios.

The prominence of fixed income indicates a strong inclination towards stability and income, while the engagement with alternatives (55%) suggests openness to innovative investment avenues. These insights can inform future asset management strategies and active ETF product offerings, aligning them with investor preferences and market dynamics.

Why is it important to align ETF offerings with investor needs?

The most dynamic innovation in the ETF space is on the active side. But unlocking the full potential will require products that closely align with what investors are seeking. We believe a well-designed suite of insight-led active ETFs, offering both core and high-conviction exposures, has the potential to bring the best of active management to investors with the efficiency and liquidity of the ETF structure.

While growth expectations are strong, challenges remain. These include liquidity constraints in certain asset classes, potential tracking error, and whether high-conviction active strategies can consistently justify higher fees compared with passive or traditional active funds.

Disclaimer: This article is based on information available as of mid-2025. The views expressed are those of the original author and do not necessarily reflect the views of FundMonitors.com. It is provided for educational purposes only and does not constitute investment advice. Investors should conduct their own research or seek professional advice before making investment decisions.