Key Takeaways
- • Active ETFs globally held nearly $1.8 trillion in assets at the end of 2025 and delivered an organic growth rate of 53% in 2025, growing roughly four times faster than passive ETF flows on a global basis and nearly double the passive share in the U.S. compared to 2022.
- • Trend-following ETFs represent a specialized subset within the broader active ETF ecosystem, with 32 trend-following ETFs trading in U.S. markets managing $3.43 billion in total assets under management at an average expense ratio of 0.69%.
- • Financial advisors are increasingly allocating capital to alternative ETFs for risk management purposes, with more than three-quarters of advisors planning to increase their allocation to alternative strategies, positioning trend-following products alongside buffer ETFs and low-volatility funds as core hedging tools.
- • Active ETF adoption reflects a strategic shift in investor preference toward outperformance and customized outcomes over passive index tracking, with nearly one-third of all ETF flows in the U.S. directed to active funds in 2025 and more than 85% of new ETF launches being active strategies.
- • Financial institutions including Goldman Sachs Asset Management, State Street, and Pacer are expanding their active and trend-following ETF offerings, addressing client demand for greater choice, flexibility, and the ability to hedge risk across multiple asset classes.
Summary
The institutional investment landscape is experiencing a marked shift toward active exchange-traded funds, with trend-following strategies emerging as a key component of risk management frameworks deployed by financial advisors and sophisticated investors. Active ETFs worldwide held nearly $1.8 trillion in assets at the end of 2025 and achieved an organic growth rate of 53% during 2025, substantially outpacing their passive counterparts. On a global basis, flows into active ETFs measured as a percentage of assets were roughly four times stronger than those into passive ETFs, according to data compiled by Morningstar and Goldman Sachs Asset Management. In the U.S. market specifically, nearly one-third of all ETF flows went to active funds in 2025, double the share observed in 2022, with more than 85% of new ETF launches being active strategies.
Trend-following ETFs represent a specialized approach within this broader active ETF ecosystem, designed to shift exposure between benchmark indexes and lower-risk assets based on market momentum and volatility dynamics. Currently, 32 trend-following ETFs trade in U.S. markets, collectively managing $3.43 billion in total assets under management with an average expense ratio of 0.69%. Pacer Trendpilot ETFs exemplify this category, employing strategies that alternate exposure between benchmark indexes and three-month U.S. Treasury bills based on trend-following signals. This structure enables investors to participate in rising markets while reducing exposure during downturns, positioning these products as tactical risk-management tools alongside buffer ETFs and low-volatility funds.
The broader adoption of active ETFs reflects fundamental shifts in investor preferences and advisor behavior. According to advisor attitude and behavior research, more than three-quarters of financial advisors plan to increase their allocation to alternative ETFs. Brendan McCarthy, global head of ETF distribution at Goldman Sachs Asset Management, notes that "clients want more choice in the ETF space" and increasingly "want to try and beat the market rather than just track it." This demand underscores a transition from passive replication strategies toward active management, income generation, and hedging capabilities. Financial institutions including State Street Investment Management and others are responding by expanding offerings across sector investing and alternative strategies, addressing the institutional and retail demand for customized portfolio solutions.
The growth trajectory of active ETFs reflects the maturation of the ETF structure itself, which has historically been associated with passive index replication. However, both retail and institutional investors increasingly recognize that the three fundamental benefits of ETFs—accessibility, transparency, and affordability—can be combined with active management strategies to achieve specific financial objectives. While some asset managers, including Dimensional Fund Advisors, caution that chasing trends may present behavioral risks, the consensus among advisors is that trend-following and other alternative ETF strategies merit expanded allocations as core components of diversified, risk-adjusted portfolios serving institutional clients, family offices, and sophisticated retail investors.
Trend-following ETFs represent a specialized approach within this broader active ETF ecosystem, designed to shift exposure between benchmark indexes and lower-risk assets based on market momentum and volatility dynamics. Currently, 32 trend-following ETFs trade in U.S. markets, collectively managing $3.43 billion in total assets under management with an average expense ratio of 0.69%. Pacer Trendpilot ETFs exemplify this category, employing strategies that alternate exposure between benchmark indexes and three-month U.S. Treasury bills based on trend-following signals. This structure enables investors to participate in rising markets while reducing exposure during downturns, positioning these products as tactical risk-management tools alongside buffer ETFs and low-volatility funds.
The broader adoption of active ETFs reflects fundamental shifts in investor preferences and advisor behavior. According to advisor attitude and behavior research, more than three-quarters of financial advisors plan to increase their allocation to alternative ETFs. Brendan McCarthy, global head of ETF distribution at Goldman Sachs Asset Management, notes that "clients want more choice in the ETF space" and increasingly "want to try and beat the market rather than just track it." This demand underscores a transition from passive replication strategies toward active management, income generation, and hedging capabilities. Financial institutions including State Street Investment Management and others are responding by expanding offerings across sector investing and alternative strategies, addressing the institutional and retail demand for customized portfolio solutions.
The growth trajectory of active ETFs reflects the maturation of the ETF structure itself, which has historically been associated with passive index replication. However, both retail and institutional investors increasingly recognize that the three fundamental benefits of ETFs—accessibility, transparency, and affordability—can be combined with active management strategies to achieve specific financial objectives. While some asset managers, including Dimensional Fund Advisors, caution that chasing trends may present behavioral risks, the consensus among advisors is that trend-following and other alternative ETF strategies merit expanded allocations as core components of diversified, risk-adjusted portfolios serving institutional clients, family offices, and sophisticated retail investors.
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