Why exchange-traded funds are a 'growth engine' of active management

Published On Nov 27, 2024, 1:07 PM

Recently, there has been a noticeable shift in investor preference from actively managed mutual funds to actively managed exchange-traded funds (ETFs). Investors removed about $2.2 trillion from active mutual funds between 2019 and October 2024, while they have added approximately $603 billion to active ETFs during the same period. This trend is attributed to lower fees and higher tax efficiency in ETFs. Currently, active ETFs account for approximately 8% of total ETF assets, contributing to their increasing popularity despite the overall decline of active managed mutual funds. Some asset managers are even converting mutual funds into ETFs to attract new capital, which has generally led to a significant inflow of funds post-conversion.