The investment environment investors face today has little in common with the one that dominated the decade following the global financial crisis. For years, low inflation, supportive monetary policy and relatively stable geopolitics allowed portfolios to be built around broad, largely passive exposures. Straightforward approaches worked well, and simply tracking the market often delivered solid returns.

That environment is gradually giving way to a far more complex reality. Inflation is now a persistent challenge, not just a passing phase. Global tensions are having a lasting impact on trade, supply chains and energy prices. Meanwhile, a handful of larger companies have come to dominate the market, while differences in performance between sectors, regions and individual firms are growing wider.

For investors, this shift has meaningful implications. Diversification remains a cornerstone of portfolio construction, but it no longer behaves as predictably as it once did. Bonds still play a stabilising role, yet their defensive properties depend more closely on the nature of the shock affecting markets. Equities continue to offer long‑term growth potential, but index‑level returns often conceal sharp divergences between sectors, regions and individual companies. In particular, the traditional 60/40 portfolio—comprising of 60% in equities and 40% in bonds—may be less effective in today’s market conditions.

This growing dispersion is one of the defining features of today’s markets. While headline indices (e.g. MSCI World or S&P500) can appear concentrated around a handful of dominant companies, a much broader opportunity set exists beyond those leaders. Structural themes such as artificial intelligence highlight this dynamic. Although attention often focuses on a select group of global technology giants, the true economic impact of AI is felt across a broad array of businesses—ranging from infrastructure and semiconductors to services and productivity improvements spanning multiple regions.

In this context, the main challenge for investors has evolved. It is no longer just about deciding which asset classes to invest in; it is equally about determining how to access them most effectively. Portfolio construction now demands as much focus on implementation as on allocation itself. Successfully translating investment convictions into robust portfolios requires tools capable of navigating growing dispersion, managing risk more precisely, and adapting to ever-changing market conditions.

This is where active ETFs can play an increasingly important role.

Active ETFs combine the key advantages that investors value in traditional ETFs, such as liquidity, transparency and ease of access, with an active investment approach powered by research. Rather than mechanically following market capitalisation, they allow portfolios to express more targeted views, whether related to valuation, income, quality or regional balance. In a market characterised by shifting correlations and uneven return drivers, this added layer of selectivity can make a meaningful difference. The active component with a more hands-on approach allows investors to access a broader set of opportunities and manage risks more actively.

While active ETFs offer greater flexibility and selectivity, they can also come with their own challenges. Outcomes depend on the quality of the investment process, and active strategies may underperform their benchmarks over certain periods. In addition, more targeted positioning and higher portfolio turnover can result in increased volatility and transaction costs.

The Benefits of active ETFs

The role of active ETFs is not necessarily to replace long‑term investment principles. Active ETFs can be used as complementary building blocks. They allow investors to fine‑tune portfolios, adjust exposures or respond to evolving market dynamics without redesigning allocations from scratch. This flexibility can help bridge the gap between strategic intentions and practical implementation.

More broadly, the rise of active ETFs reflects a deeper evolution in how portfolios are built. Diversification today is less about holding a small number of broad exposures and more about combining differentiated sources of return in a deliberate way. That evolution naturally increases the value of research, judgement and adaptability, qualities that are increasingly embedded within active ETF strategies.

In a world shaped by fragmentation, dispersion and uncertainty, efficiency alone is no longer sufficient. Investors are looking for tools that offer clarity, control and flexibility.

Active ETFs are becoming more prominent as investors seek tools to navigate increasingly complex market conditions.

Active ETF AUM evolution - Over $1trn AUM in actively managed ETFs

Investments involve risk and investors may lose part or all of their invested capital.

Important Information

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Contact:

Fidelity International

Solène Garnavault

Solene.Garnavault@fil.com