Active ETFs are taking the financial world by storm, and 2025 was their most explosive year yet. With a staggering $475 billion in inflows—roughly one-third of all ETF investments—these funds are reshaping the investment landscape. But here’s where it gets controversial: while active ETFs are booming, not all are created equal, and some are struggling to survive. Let’s dive into the numbers, trends, and standout performers that made 2025 a record-breaking year for active ETFs.
Last year saw the launch of nearly 1,000 active ETFs, accounting for 35% of the approximately 2,800 U.S.-based active ETFs in existence. To put this in perspective, only about 150 passive ETFs debuted in the same period, bringing the total U.S. passive ETF count to around 3,500. Traditional mutual funds? Just 95 launched last year. While active ETFs still trail the 6,300+ U.S.-listed mutual funds, they’re clearly the preferred choice for new launches among asset managers.
Short-term, trading-oriented ETFs stole the spotlight in 2025, with over 340 new funds hitting the market. These fall under Morningstar’s trading category, including leveraged equity, inverse equity, and miscellaneous strategies. For example, some offered extreme exposures, like doubling the daily return of Coinbase (COIN), a leading cryptocurrency exchange. These high-risk, high-reward funds cater to traders seeking amplified market moves, but they’re not for the faint of heart.
Among broader asset classes, equity and short-term-oriented strategies dominated, with over 400 launches. Three firms led the charge: GraniteShares (71 ETFs), Themes ETF Trust (63), and Defiance (59). Meanwhile, heavyweights like State Street, T. Rowe Price, and BlackRock’s iShares continued to expand their active ETF offerings. State Street introduced derivative-income versions of its Select Sector SPDR ETFs, while T. Rowe Price launched nine equity strategies and four fixed-income funds. BlackRock’s buffer ETFs, which protect investors from losses up to a certain threshold, gained traction. For instance, a 12% buffer ETF shields investors from losses up to 12%, though they’d bear the difference if markets fall further.
Morningstar analysts began covering three notable 2025 launches, including the Brown Advisory Sustainable Growth ETF (BASG) and Harbor Mid Cap Core ETF (EPMB), both variations of existing strategies in new wrappers. These additions highlight the growing diversity within the active ETF space.
The top 25 active ETFs captured roughly one-third of 2025’s inflows, with J.P. Morgan leading the pack. Five of its ETFs made the list, including the popular JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) and JPMorgan Equity Premium Income ETF (JEPI), which continued to attract billions. BlackRock’s iShares US Equity Factor Rotation ETF (DYNF) retained its crown as the most popular active ETF, pulling in over $13 billion, thanks in part to its inclusion in target-date and model portfolios. As artificial intelligence drove market gains, BlackRock’s iShares A.I. Innovation and Tech Active ETF (BAI), managed by veteran Tony Kim, secured more than $7 billion. American Century’s Avantis ETFs also shone, with three funds—including an emerging-market and two international offerings—gathering over $15 billion.
Large-blend, ultrashort bond, and derivative-income active ETFs collectively accounted for about one-third of 2025’s inflows. Six firms—J.P. Morgan, Capital Group, Dimensional, iShares, American Century, and Fidelity—captured roughly 50% of all active ETF inflows, underscoring their dominance in the space.
But not all active ETFs thrived. Approximately 150 were merged or liquidated in 2025, and more closures are expected as newer funds struggle to attract assets. Notably, five strategies, including the ARK Innovation ETF (ARKK), saw outflows exceeding $1 billion each. This stark contrast between winners and losers raises questions: Are active ETFs a surefire bet, or are they a high-stakes gamble?
One of the key advantages of active ETFs is their ability to limit capital gains, making them ideal for taxable accounts. Morningstar analysts now rate over 180 active ETFs, including top-rated picks highlighted below. As the active ETF landscape evolves, investors must navigate this dynamic space with caution and strategy.
Here’s the thought-provoking question: With active ETFs dominating new launches but showing such wide performance disparities, are they the future of investing, or just a passing trend? Share your thoughts in the comments—we’d love to hear your take!
The author(s) do not own shares in any securities mentioned in this article. Learn more about Morningstar’s editorial policies here.
