Active ETFs Dominate 2025 Investment Flows Amid Market Volatility
The investment landscape in 2025 has undergone a seismic shift, with active Exchange-Traded Funds (ETFs) capturing 35% of all new net flows—a record $378 billion—despite representing just 10% of the total ETF market. This surge reflects a broader pivot away from passive indexing as volatility, sector dispersion, and normalized interest rates redefine opportunities for alpha generation.
Investors are increasingly demanding active management in ETF wrappers, drawn by their transparency, tax efficiency, and liquidity. Yet the market remains fragmented, with strategies ranging from high-conviction stock picking to benchmark-hugging 'closet indexing.' The challenge lies in distinguishing true alpha potential from inflated fee structures.