You are on the Investment solutions website for advisors & wealth management firms.
Browse more Fidelity websites here.
Strategies
Active ETFs: The power of active management and the flexibility of an ETF
With benefits spanning from active management to tax efficiency, now's the time to take a fresh look at active ETFs and Fidelity's robust active ETF lineup.
3 reasons to consider active ETFs
Right now, more than 60% of advisors plan to increase their usage of ETFs—including nearly 50% who plan to do so with active ETFs.1 With active ETFs, you can invest based on your market views while managing capital gains, get exposure to active managers who don’t merely follow an index, and trade with more flexibility during periods of volatility. A modern portfolio construction technique, active ETFs offer advantages to your client portfolios, including:
Tax efficiency
The structure of ETFs offers opportunities for tax efficiency and tax-loss harvesting—two critical strategies that can help you better manage your clients’ portfolios.
Help clients achieve higher returns
Active ETF managers can act on opportunities to generate excess returns, since they are not bound to an index in the way that passive ETFs are. This potential for alpha is critical for client portfolios, especially during times of high volatility.
Holdings transparency & intraday trading
Traditional mutual funds trade once per day after the markets close. Active ETFs are bought and sold during the day while markets are open, offering you intraday trading capabilities for easier portfolio management. And when it comes to cost, portfolio expenses are generally lower for active ETFs relative to their comparable actively managed mutual funds.
The tax efficiency of active equity ETFs
Recent data continues to underscore the tax efficiency of active equity ETFs, reinforcing their appeal for tax-conscious investors. In 2024, only 9% of active equity ETFs distributed capital gains, compared to 64% of mutual funds, as shown in the graph to the right. This pattern has held steady over the past three years, highlighting the structural advantages of ETFs in managing taxable events.
Additionally, the median capital gains distribution among ETFs remained modest at 1.1% of NAV in 2024, while mutual funds distributed a significantly higher 6.3%, as shown in the graph to the right. These differences are not just statistical—they translate into real tax savings for clients.
As the ETF landscape continues to evolve, advisors have access to a growing array of active strategies in ETF wrappers. This enables more flexibility in portfolio construction while maintaining a focus on tax efficiency.
Active ETFs can offer efficiency when managing gains
Frequency of Distributions: % of Active Funds Distributing Any Capital Gains to Shareholders
Past performance is no guarantee of future results.
Excludes new funds launched in same year as capital gains distribution measurement.
Source: FI Market & Competitive Intelligence, Morningstar Direct, as of 12/31/24.
Active ETFs have helped clients achieve higher returns
The advisor-sold market continues to be a cornerstone of the active ETF landscape, with approximately 70% of active ETF assets under management (AUM) consistently attributed to advisor-driven channels over the past three years (detailed in the figure at the top right). This stability underscores the growing trust and adoption of active ETFs among financial professionals.
The growth trajectory is equally compelling. Active ETFs have posted remarkable compound annual growth rates (CAGRs)—59% over 1 year, 41% over 3 years, and 50% over 5 years—far outpacing both active mutual funds and passive ETFs. This momentum is reflected in asset growth as well, with total industry AUM projected to surge from $256 billion in 2020 to $910 billion in the near future, as shown in the graph on the bottom right.
More investors are choosing active ETFs
* Advisor-sold market includes RIA, Broker-Dealer, and Wirehouse channels. Source: FI Market & Competitive Intelligence, Simfund, Broadridge GMI Funds, as of 12/31/24.
Past performance is no guarantee of future results.
Lower cost & trading flexibility
Intraday management of a portfolio is efficient with active ETFs, thanks to the nearly instantaneous trading of ETF shares. You can efficiently move clients’ money between specific asset classes, such as stocks, bonds, or commodities—allowing you to react to market changes as they happen.
And when it comes to cost, your clients may be thinking that active ETFs are too expensive. In fact, active ETFs have a lower expense ratio compared to actively managed mutual funds. Coupled with the power of compounding, portfolio returns have the potential for significant growth over time, per the example shown on the right.
Lower cost can lead to higher returns
Comparing growth of $100,000 with different expense ratios.
After 30 years, with an assumed 6% annual growth rate, the power of lower cost and compounding returns grows the ETF investment to $484,416 while the mutual fund reaches only $402,366. As of 12/31/23.
Past performance is no guarantee of future results.
What active ETFs can do for your portfolios
The traditional benefits of ETFs being cheaper, more tax-efficient, and having daily liquidity have always helped make ETFs more appealing to financial advisors. The growing appeal of ETFs has been boosted by the increased access to actively managed ETFs, which are now attracting advisors who want active strategies.
WHY FIDELITY
Do more for your clients' core with Fidelity active ETFs
Fidelity active ETFs combine our industry-leading approach to security selection, research, and technology with the potentially greater tax efficiency and lower costs of an ETF.
INVESTING IDEAS
Put active ETFs to work for your clients’ portfolios
Investing hurdles such as balancing growth and protection, tackling inflation, and attaining diversification persist—but innovations have emerged. Active ETFs are turning obstacles into opportunities.
EDUCATION
Active ETF insights & education from Fidelity
Investors are increasingly asking for active ETFs. Learn more about how they work, increasing industry adoption, and the varied role active ETFs can play in client portfolios.
Want to know more?
Get the details on Fidelity's active ETF lineup and let us know if you'd like to schedule a meeting to discuss building better portfolios with active ETFs.
Explore more investment products & solutions
1 Source: "Fidelity Competitive & Market Intelligence, Simfund, Broadridge GMI Funds. As of 12/31/24.
ETFs are subject to market fluctuation and the risks of their underlying investments. ETFs are subject to management fees and other expenses.
Diversification does not ensure a profit or guarantee against a loss.
There is no guarantee that a factor-based investing strategy will enhance performance or reduce risk. Before investing, make sure you understand how the fund’s factor investment strategy may differ from more traditional index products. Depending on market conditions, fund performance may underperform compared to products that seek to track a more traditional index. The return of an index ETF is usually different from that of the index it tracks because of fees, expenses, and tracking error. An ETF may trade at a premium or discount to its Net Asset Value (NAV)
1209566.1.0
24109ACFDB274030BED40C3DC3377614