Since the passage of SEC Rule 6c-11, also known as the ETF Rule, in 2019, the number of active ETFs in the marketplace has grown exponentially. The ETF Rule helped to streamline the ETF approval process, allowing more funds to come to market without the need for exemptive relief from the SEC.

One of the key aspects of the rule is the allowance for the use of custom baskets within the creation and redemption process. This provision provides managers with greater flexibility to manage an ETF’s portfolio and liquidity, particularly in markets in which the included securities may be less liquid or more difficult to access.

Since the creation/redemption process is fundamental to the unique benefits of the ETF structure, the implementation of this rule opened the door for active strategies to enter the market within a liquid, transparent, and tax-efficient structure.

Assets within active ETFs have soared

Assets in actively managed ETFs have surged in recent years, driven by market volatility and a growing set of available strategies. Although active ETFs account for just 12% of total ETF assets, they have attracted 40% of all ETF flows in the first few months of 2026.¹

Source: SIMFUND, 2026.

Advisors are increasingly interested in using ETFs

Financial advisors are increasingly viewing ETFs as an essential component of their clients’ portfolios due to their many benefits: lower cost, transparency, liquidity, and a higher degree of tax efficiency.

A decade ago, financial advisors were allocating nearly 13% of client portfolios to ETFs. Since then, the number has risen to over 23%. This upward trend is expected to continue, with ETFs continuing to gain share within client portfolios.

Source: “U.S. Exchange-Traded Fund Markets 2025,” Cerulli Associates, 2025.

Recent surveys also point to a clear preference for active ETFs. With nearly 70% of respondents now expecting to increase their exposure to active ETFs over the next six months, this reflects a significant shift in investor behavior and a notable departure from the historical dominance of active mutual funds within investor portfolios.

Source: “The Global ETF Survey 2025,” Trackinsight, 2025.

Navigating the active ETF landscape

Active ETFs offer investors the potential to generate alpha by providing access to the expertise of skilled portfolio managers who seek to outperform the market, while the benefits of the ETF structure can potentially enhance overall portfolio management and the investment experience for clients.

However, the extent of these advantages can vary widely depending on factors such as the fund’s underlying strategy, assets under management, and trading and portfolio optimization processes. Careful selection and evaluation are essential for those who are looking to leverage the potential benefits of active ETFs for their clients.

Want to learn more about how to select and evaluate active ETFs? Read our white paper on developing a framework for active ETF due diligence.

1 “Active ETFs Capture 40% of Flows Despite 12% Market Share”, ETF Trends, 4/28/26.