Actively managed ETFs hit $1 trillion milestone: Why tariff uncertainty may spark more growth

 

Actively Managed ETFs Hit $1 Trillion Milestone: Why Tariff Uncertainty May Spark More Growth

In a landmark moment for the exchange-traded fund (ETF) industry, actively managed ETFs have surpassed $1 trillion in assets under management (AUM) for the first time, according to recent data from Morningstar. This milestone reflects both investor appetite for agile portfolio strategies and a shift away from the passive-only mantra that has long dominated ETF investing.

From Niche to Powerhouse

Actively managed ETFs—funds where portfolio managers make real-time decisions about asset allocation rather than tracking an index—have grown rapidly over the past five years. Once considered a niche segment within the broader ETF market, active ETFs now represent approximately 6% of total ETF assets in the U.S. and are growing at a faster clip than their passive counterparts.

Several factors have driven this growth: regulatory shifts like the SEC’s 2019 Rule 6c-11, which streamlined ETF issuance; the entry of traditional mutual fund giants into the ETF space; and an investor base increasingly focused on tactical flexibility, cost efficiency, and transparency.

But in 2025, a new catalyst is emerging that could fuel even greater interest in actively managed ETFs: rising tariff uncertainty.

Tariff Tensions: A New Volatility Driver

Global markets are once again facing geopolitical tremors as the U.S. and several trading partners, including China and the European Union, reconsider tariff regimes that had been dormant or reduced in recent years. With elections on the horizon in multiple countries, protectionist rhetoric is back in vogue, and tariffs are once again a wildcard that could reshape supply chains, profit margins, and investor sentiment.

For passive ETFs, which lock investors into a fixed basket of securities, this uncertainty can be a liability. Broad-based index funds may carry heavy exposure to sectors or companies that are especially vulnerable to trade frictions—think semiconductors, industrials, or consumer goods—without the ability to pivot quickly.

In contrast, actively managed ETFs can adjust exposures dynamically in response to shifting geopolitical winds. Portfolio managers can overweight companies better insulated from trade disruptions or seek out regions and sectors positioned to benefit from new tariff arrangements. This kind of adaptability is increasingly attractive in a world where headlines can move markets overnight.

Who’s Leading the Pack?

The $1 trillion milestone was driven by both equity and fixed-income products, but equity funds continue to dominate the space. Among the top performers are actively managed ETFs from firms like JPMorgan Asset Management, Dimensional Fund Advisors, Fidelity, and Capital Group. JPMorgan’s JPMorgan Equity Premium Income ETF (JEPI) alone accounts for over $30 billion in AUM and has become a popular income-generating strategy in volatile markets.

Meanwhile, fixed-income active ETFs, including PIMCO Active Bond ETF (BOND) and BlackRock’s iShares lineup, have seen renewed interest as interest rate uncertainty keeps bond investors on their toes.

The Outlook: More Growth Ahead?

If market volatility tied to tariffs and trade persists, active ETFs may emerge as an essential tool for investors seeking resilience and responsiveness. Additionally, the ability to combine active management with the liquidity, transparency, and tax efficiency of ETFs offers a compelling middle ground for those historically torn between mutual funds and index ETFs.

Institutional investors are also warming to active ETFs, thanks in part to lower fees compared to traditional mutual funds and the ability to execute large block trades efficiently.

As more asset managers launch active ETF products and investor confidence in these vehicles grows, it’s likely that the next trillion could arrive far sooner than the first. In a world where geopolitical risks and policy pivots are the new normal, agility may be the most valuable alpha generator of all.