Active ETFs Raise the Bar for Advisor Diligence

More Active Choices, More to Vet

Active ETF issuers launched 953 new strategies in 2025, a total with no recent precedent. That alone exceeds the 797 ETFs launched across the entire market in 2021. It also triples the 308 active strategies introduced that same year, according to Cerulli.

Issuers show little sign of slowing down. Cerulli found that 83% plan to launch at least one active ETF in 2026. Separately, 94% say they are either developing or planning transparent active ETF solutions.

Investor dollars already reflect that shift toward active strategies. Active ETFs pulled in $153.9 billion during the first quarter of 2026, according to fund-flow data included in the report. Active mutual funds shed more than $108.7 billion over the same three months, including more than $65 billion in March alone.

See more: A Roundup of June’s Most Notable ETF Launches

"The overall ETF ecosystem remains strong, with product development backed by tremendous flows to the structure and uptake across categories," said Kevin Lyons, senior analyst at Cerulli Associates. "In fact, 2025 marked the third straight year with a record number of new ETF launches. At the same time, the rapid buildout of a range of in-demand solutions creates the risk of a closure wave."

Closures Concentrate in Subscale Funds

Most closures continue to hit funds that never gathered momentum. Since 2021, more than 85% of ETF closures have involved products with less than $50 million in assets under management. That share climbed to 92% in 2025, the highest mark of the past five years, the report found.

Defined outcome, leveraged, and option income strategies drive much of that subscale count. Together, those three categories make up nearly one-third of all funds under $50 million, according to Cerulli.

Issuers are also cutting ties faster than before. The average lifespan of a closed ETF fell from four to five years between 2021 and 2024. In 2025, it dropped to just over three years, the report found.

Brand loyalty appears to be compounding the closure risk for new entrants. By the end of 2025, Innovator and First Trust together controlled 86% of the defined outcome ETF category, Cerulli found. That signals that advisors in this space tend to stick with familiar names, even when cheaper alternatives launch.

"Although closures could increase due to new product development, it is unlikely to hamper the broader ETF industry," Lyons said.

Cerulli's issuer survey found that 94% of ETF issuers plan to close two or fewer transparent active ETFs in 2026. All respondents plan to close two or fewer passive cap-weighted funds. By contrast, 87% plan to launch at least one transparent active ETF, with 39% aiming for six or more.

Institutions Turn to Active ETFs for Core Exposures

Beyond issuer launch plans, professional buyers are reshaping how ETFs get used inside portfolios. Third-party model portfolio strategists allocate an asset-weighted 95.2% of assets to ETFs, while asset manager models average 45.5%, Cerulli found.

Open architecture is accelerating that shift. More than 90% of asset manager model providers now offer at least one open-architecture option, according to the report, giving RIAs more room to add nonproprietary funds to client accounts.

Institutional asset owners are increasing their ETF use too, though from a smaller base than model portfolios. Institutional channels hold just 15% of the $13.4 trillion in total U.S. ETF assets, according to the report.

Cerulli found that 39% of asset owners plan to increase their ETF use over the next two years, and some of the largest allocators are already acting on it.

Pension giant CalPERS, the California Public Employees' Retirement System, recently seeded the $2.2 billion JPMorgan Active High Yield ETF (JPHY). The State Street Blackstone Senior Loan ETF (SRLN) holds nearly $1.2 billion in institutional assets, the report noted.

Advisor use of third-party strategists and model portfolios ranks as the top growth driver for 59% of ETF issuers, Cerulli found. They expect that pattern to hold over the next 12 months.

By contrast, institutional adoption ranks as a standalone driver for just 29% of issuers. Still, issuers broadly view it as at least a partial contributor to future ETF growth, according to the report.

Financial advisors overall allocate 22.5% of client assets to ETFs. Independent RIAs lead the pack at nearly 38.8%, the report found.

Institutional asset owners are already testing the active fixed income space. The Texas Permanent Fund School Corporation has put $742 million into the Eaton Vance Floating Rate ETF (EVLN). That shows how far some of the industry's largest allocators are willing to go beyond passive index tracking.

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