Active ETFs Steal the Show: Topping $1 Trillion Mark

In a year where both equity returns and interest rate cuts are in question, ETFs have laid fertile ground for the rise of active management. Markets have lacked strong conviction, and banks have raised their forecasts for a recession. As a result, a few key themes have emerged across the most popular active ETFs so far in 2025. Those include derivatives, high dividends, international, factor investing, short-term fixed income and securitized loans.

The bulk of flows into active ETFs has gone toward systematic and rules-based strategies that differ starkly from the traditional image of stock-picking active managers. Investors are hoping to dilute the extreme levels of concentration stemming from a small handful of stocks. Many have turned to differentiated exposures through sophisticated investment approaches like covered call strategies and options-based income generation, which often require professional expertise.

The JPMorgan Nasdaq Equity Premium Income ETF (JEPQ A+) has emerged as the most popular active equity ETF, attracting around $4 billion in new money this year. JEPQ generates income by selling call options against the Nasdaq 100 Index and collecting premiums from those sales. Close behind is the JPMorgan Equity Premium Income ETF (JEPI A), a $31 billion fund that has accrued $3 billion in net inflows. JEPI focuses on low-volatility, high-quality stocks, while also employing a covered call strategy to enhance yield.

“Investors are looking for more active strategies at scale with a track record,” Travis Spence, Global Head of ETFs at J.P. Morgan Asset Management told me last week at VettaFi’s Exchange Conference. “The question now becomes, has the growth rate for passive peaked?”

Buffer ETFs, another rising star in the active space, are having their time in the sun, thanks to market whiplash from tariff headlines. These products, which aim to provide downside protection from steep declines while capping upside gains, have attracted significant attention from baby boomers and retirees seeking to stay invested with reduced risk. Year-to-date, defined outcome ETFs have taken in more than $4 billion in net inflows, reflecting their growing appeal in volatile markets.

Dividend-focused ETFs remain a priority for investors seeking stable income. Firms like Capital Group have seen tremendous success with funds like the Dividend Value ETF (CGDV A), which has netted $2 billion in inflows this year. Advisors have also favored funds with factor tilts, such as the iShares U.S. Equity Factor Rotation Active ETF (DYNF A-), which has grown its assets from just $50 million at the start of last year to $15 billion today.

Similarly, thematic ETFs are evolving to align with more structural, long-term trends. The iShares U.S. Thematic Rotation Active ETF (THRO B+) has gained traction by offering tactical exposures to timely themes, such as reshoring and artificial intelligence.

“I think rather than saying thematics have fallen by the wayside, it’s more that thematics have reinvented themselves,” noted Jay Jacobs, BlackRock’s U.S. Head of Thematic and Active ETFs at Exchange. “We’re witnessing thematic 2.0 right now. It’s less tech-focused and more about longer-term, structural trends that are paving the way for the future.”

International ETFs are finally proving to be a bright spot, delivering strong relative total returns. Dimensional funds have led the charge, with the International Core Equity Markets ETF (DFAI ) pulling in over $1 billion in inflows this year. Meanwhile, Avantis has seen steady inflows into its International Small Cap Value ETF (AVDV ), offering factor-based exposure for investors seeking diversification beyond the U.S. border.

But the most impressive growth has stemmed from the fixed income side. Rates have normalized, but the Federal Reserve policy forecast remains cloudy. Rather than blindly buying more duration, investors have flocked to ultra-short duration bond ETFs. The JPMorgan Ultra-Short Income ETF (JPST A) and the PGIM Ultra Short Bond ETF (PULS ), have brought in $3 billion and $2 billion, respectively, as investors look for safety during uncertain times.

Even in more niche segments, like securitized debt, active ETFs have captured significant investor interest. A pair of CLO ETFs tops the list of most popular active fixed income ETFs — the Janus Henderson AAA CLO ETF (JAAA ), with $4.7 billion in net inflows, and the PGIM AAA CLO ETF (PAAA B) has raked in $2 billion. The $3 billion fund invests primarily in mortgage-backed securities.

The ETF industry has undergone a fundamental transformation, redefining what it means to be “active.” No longer are active managers simply mimicking their passive counterparts. Investors are demanding truly differentiated strategies that deliver better risk-reward outcomes. The days of paying a premium for closet indexing are over.

With over $1 trillion in active ETF assets, active strategies are becoming an integral part of portfolios for investors seeking yield, downside protection and adaptability. And if the SEC approves a wave of proposals allowing mutual funds to create ETF share classes, this segment’s growth is likely to accelerate even further. Active ETFs are no longer just stealing the show — they’re rewriting the script entirely.

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