Exchange Traded Funds (ETFs) are entering a new era. Long defined by passive strategies, the ETF market is now seeing growing demand for active approaches – blending the transparency and liquidity of ETFs with the flexibility and insight of discretionary management. For ÃÛ¶¹ÊÓƵ Asset Management, the launch of its first active ETF marks a strategic milestone, setting the stage for an expanded offering that includes fixed income strategies, with potential equity strategies under development.

Why active ETFs, and why now?

In a more volatile and complex market environment, the ability to respond to changing conditions is increasingly valued. Active ETFs offer a way to manage portfolios with greater flexibility than traditional passive vehicles – including the potential to adjust allocations based on current market dynamics, manage risks proactively, and refine exposures in a transparent wrapper.

Unlike passive vehicles, active ETF managers aim to generate added value through discretionary allocation decisions, informed by research, market insight, and risk assessments – allowing them to deviate from index constraints where opportunities arise.

A use case: CLOs in the active Fixed Income ETF space

Collateralized Loan Obligations (CLOs) illustrates how certain fixed income segments may benefit from active management. With more than USD 1.1 trillion in global assets and around USD 100bn in annual issuances, CLOs play an important role within the securitized credit market.1

For qualified investors seeking exposure to this asset class, active ETFs may offer tools to:

  • Respond to spread movements across senior and subordinated tranches
  • Adapt credit exposures in response to changing credit conditions
  • Adjust portfolio positions based on market signals and manager insights.

It’s important to note that CLOs are complex instruments and my not be suitable for all investors. Active ETFs that include CLOs require careful consideration of the risks involved.

Active ETF growth in Europe

Although the US has seen strong adoption of active ETFs, Europe is still in the early stages of development. In 2024 approximately 26% of net flows into US-domiciled ETFs went into active strategies2, compared to only 7% in Europe.3 However, the European market is gradually expanding, supported by evolving regulation, investor education, and growing interest in differentiated investment tools.

Drivers of growth include:

  • Increased institutional familiarity with the ETF structure
  • Evolving retail demand, particularly among sophisticated investors
  • Supportive regulatory developments, enabling broader use of active strategies.

Looking ahead: Extending across asset classes

While ÃÛ¶¹ÊÓƵ AM’s initial focus is in fixed income, additional strategies are being explored, with further ETF innovations expected over time – subject to market conditions, client needs and regulatory approvals. These strategies could offer additional avenues for implementing investment views and managing risks through the ETF format. Any such offerings would aim to align with ÃÛ¶¹ÊÓƵ Asset Management’s existing active management capabilities and long-term investment approach.

Strategic readiness: What it takes to lead in active ETFs

As demand for active ETFs grows, success will depend on more than product innovation. Asset managers will need to demonstrate a clear strategic foundation and the operational capabilities to meet evolving investor expectations.

For ÃÛ¶¹ÊÓƵ Asset Management, three areas stand out:

  1. Depth of investment expertise
    Active ETFs require more than index-beating ideas – they rely on disciplined, repeatable processes across asset classes. ÃÛ¶¹ÊÓƵ Asset Management’s long standing active management platform provides a foundation to support ETF strategies with sector insight, risk analytics, and global research.
  2. Institutional grade infrastructure
    Building credible active ETF solutions means delivering not just performance, but scale, liquidity management, and operational transparency. ÃÛ¶¹ÊÓƵ Asset Management’s global platform supports efficient portfolio implementation, robust risk oversight, and alignment with the highest institutional standards.
  3. Commitment to client education and partnership
    Active ETFs are still evolving in Europe, and investor understanding varies. ÃÛ¶¹ÊÓƵ Asset Management works closely with clients to provide transparency around strategy design, risk factors, and use cases – especially in more complex areas like structured credit or emerging equity styles.

Risk considerations

As with all investments, active ETFs carry risks. These include market risk, credit risk, and manager risk – as performance depends on investment decisions that may not align with broader market outcomes. Investors should ensure that any product aligns with their investment objectives, risk tolerance, and time horizon. Past performance is not indicative of future results.

Thoughtful implementation: A deliverable step forward

ÃÛ¶¹ÊÓƵ AM’s entry into active ETFs reflects a strategic expansion of its platform, aiming to provide investors with tools that combine active insights with the structural benefits of ETFs. While initial offerings include fixed income strategies – including exposure to high quality assets such as AAA-rated CLO tranches – the broader goal is to gradually build out a scalable and diversified active ETF platform, drawing on ÃÛ¶¹ÊÓƵ Asset Management’s established strengths in fixed income, and potential future equity capabilities.

As the European market continues to evolve, active ETFs are positioned to become an important component of investment portfolios – particularly for those seeking additional flexibility and professional oversight within a regulated structure.

1 S&P Global Ratings, Global CLO 2024 Outlook: Resilience Amid Complexity, January 2024
2 Morningstar data, 2024, covers netflows into US-domiciled ETFs.
3 ETFbook platform, 2024, covers EU-domiciled ETFs

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