“Active ETFs offer transparency and liquidity similar to passive ETFs, while also providing alpha protection in volatile environments that passive ETFs do not,” argued Arnaud Gebhart, head of international ETF platform at JPMorgan Asset Management, during ALFI’s Asset Management Conference on 24 March 2026.
The global ETF industry is undergoing rapid expansion, with more than $2.4tn in net inflows in 2025, according to Laura Tarrant, ETF Product, EMEA at State Street.
While passive products still command approximately 90% of the industry’s assets, active ETFs are expanding at twice the pace of the broader market, maintaining a compound annual growth rate of 45% over the last decade, said Gebhart. He added that while active ETFs account for 10% of global ETF assets under management (AUM), they capture 25% of flows.
Luxembourg’s edge in active ETFs
Luxembourg is central to this evolution, serving as Europe’s largest fund domicile, with assets of around €8tn. Tarrant noted that the jurisdiction has established itself as a premier base for active and hybrid ETFs by offering a “state-of-the-art” regulatory framework.
Key advantages include naming guidelines that allow ETF share classes without modifying sub-fund names, the removal of subscription taxes, a quarterly disclosure of the portfolio, and an efficient approval process where new share classes can be authorised in a matter of days, observed Sergio Venti, Partner at Deloitte.
The good news is most asset managers already have the core building blocks of what it takes to build an ETF business
A significant point of attraction is synthetic replication. It allows funds to mitigate withholding tax inefficiencies on US equities and to remain competitive without directly holding underlying securities.
Craswell noted that their 13th annual ETF survey revealed that 82% of investors are now comfortable with the share-class structure. However, this requires careful management of operational nuances, such as how swing pricing on a main fund interacts with the ETF share class, where such pricing is typically avoided.
From mutual funds to ETFs: the 80/20 rule
“The good news is most asset managers already have the core building blocks of what it takes to build an ETF business,” said Andrew Craswell, principal , European head of client relationship management, Brown Brothers Harriman. He explained that transitioning from mutual funds to ETFs follows an ‘80/20’ rule: roughly 80% of the infrastructure—such as governance and management companies—already exists. The remaining 20% involves ETF-specific capabilities.
The critical 20% difference lies in the role of capital markets. “It supplies the market with ETF shares and manages the redemption process,” said Craswell. Secondly, it requires specialised operational oversight and near real-time data dissemination, such as publishing Portfolio Composition Files (PCFs) and Net Asset Values (NAVs) daily and making them available to the trading community thereafter.
The third question is about cost. “Do I build the capital markets in house or set up a separate Icav? Do I launch an ETF share class from my existing mutual fund?” asked Craswell. Tarrant noted that a share class model is often a “lighter lift” for managers with established active strategies, as it allows them to leverage existing scale and performance history.
Operational resilience is paramount, as any manual friction is considered the “enemy of the ETF,” stressed Gebhart. Significant investment in automation, APIs, and AI is required to manage order approvals and monitor market dislocations in real time. Furthermore, data quality is critical; if traditional data vendors fail to understand ETF-specific nuances, investors may quickly switch to a competitor’s product.
Digital platforms drive ETF growth
The distribution landscape is being transformed by the “retailisation” of the European market. Historically dominated by institutional investors, Venti suggested that ETFs are increasingly distributed through online platforms, robo-advisors, and neo-banks.
To succeed in this segment, Venti argued that issuers must provide extensive data and content to support model portfolios and the digital algorithms used by these platforms and “to remunerate them as well.” This shift is a long-term commitment, often requiring over five years of investment in education and brand presence, particularly as a massive generational wealth transfer approaches.
Private assets in ETFs: Still a distant goal
While interest is growing in wrapping private assets and tokenisation within ETFs, Craswell admitted that these developments remain medium-to-long-term goals due to liquidity and regulatory constraints. “Ultimately, the ETF is as liquid as the underlying holdings that are within that product,” he said.
Speakers agreed that further harmonisation of European tax rules and progress toward a savings and investment union will be critical to unlocking the ETF market’s full potential.