Travis Spence, Global Head of ETFs at J.P. Morgan Asset Management, predicts a significant boom in active ETFs, with volumes expected to quadruple over the next five years, while the overall ETF market is projected to double. He notes that both 2023 and 2024 were record years for the industry, with approximately 30% growth rates, and 2026 is exceeding those levels in terms of net inflows, new issuances, and trading volumes. This indicates that ETFs are now a well-established preference for investors.
The active segment is cited as the primary growth engine for the ETF industry, particularly in active equity strategies and fixed-income ETFs. Spence highlights a rapidly expanding opportunity set for fixed-income ETFs, anticipating a much larger role for them, especially active ones, in portfolio allocations. Additionally, there is increasing demand for derivatives-based strategies, such as income and hedged-equity ETFs, which are already successful in the US and are now entering the European market.
While the US has seen over $2.49 trillion in active ETF assets and more active ETFs than passive ones, Europe is still in earlier stages of this development. However, Europe is projected to follow suit, with traditional passive managers aggressively launching active ETFs. Spence also suggests that artificial intelligence will fundamentally reshape portfolio construction by analyzing portfolios, identifying weaknesses, and recommending appropriate ETF building blocks across asset classes, enhancing rather than replacing the industry.
Regulatory developments and digital platforms are also contributing to the tailwinds for ETFs, making investing more accessible. The shift is towards personalized, holistic solutions, moving beyond single-product investing. The convergence of traditional mutual fund structures with ETF formats is leading to a gradual migration, especially for active strategies, as investors seek combined diversification, active management, and ease of access.
