Three common misconceptions about active ETFs — and why they matter in volatile markets
As more investors incorporate active ETFs in their portfolio, several recurring claims keep surfacing that don’t fully hold up in practice.
Active ETFs are having a moment and not just because the vehicle is relatively new in parts of the market. As more professional investors incorporate active ETFs into their portfolios, I keep hearing a handful of recurring claims that don’t quite stack up in practice.
Some of these considerations are understandable: historically, ETFs have been associated with passive exposure and tactical trading, while “active” has often meant mutual funds, less frequent disclosure, and longer dealing cycles. But the reality in today’s UCITS market is more nuanced. The practical question isn’t whether an ETF is “active” or “passive” in principle; it’s whether the vehicle gives you the tools you need to implement your investment view efficiently, particularly when markets are moving around.
That perspective is supported by Schroders’ Global Investor Insights Survey 2026, which suggests the debate is shifting from whether to use active ETFs to how to use them effectively. In the survey, more than nine in ten (94%) of respondents said they see a role for active ETFs in portfolios (with 6% saying the opposite). In a backdrop of elevated volatility and persistent uncertainty, investors are looking for ways to invest quickly, monitor exposures closely, and adjust positions when required without giving up active decision-making.
Here are three misconceptions worth addressing, alongside what our latest research indicates investors are actually prioritising.
1: “Active ETFs are just cheaper mutual funds”
You’ll often hear active ETFs described as “mutual funds in an ETF wrapper, but cheaper”. Cost can be part of the conversation, but focusing on it misses the more important point, which is how the vehicle can be used.
Our 2026 survey confirms that cost still dominates the headlines: 70% of respondents ranked lower costs (relative to mutual funds) in their top three considerations when choosing an active ETF. But cost is no longer the whole story.
Investors highlighted a set of operational and implementation advantages that matter most when markets are moving around:
- Intraday liquidity and flexibility to trade at market prices (50%)
- Improved secondary-market liquidity versus mutual funds (43%)
- Greater portfolio transparency (41%)
- Access to active strategies not available as a mutual fund (40%)
These are practical portfolio management benefits. The ability to trade intraday and access liquidity on exchange — often supported by market makers — can be a genuine advantage versus a once-a-day dealing cycle, particularly when you are managing risk, meeting flows, or implementing changes under time pressure.
A more meaningful comparison isn’t whether an active ETF is cheaper, but the implementation flexibility the ETF wrapper provides — and how that flexibility helps you deliver the portfolio outcome you’re targeting.
2: “They’re only for tactical trades”
This is a legacy perception from the early days of ETF adoption, when many investors first used ETFs as efficient tools for quick exposure changes (eg. equitising cash, managing transitions, or making short-term tilts).
Active ETFs can be used tactically, but that’s only one use-case, and increasingly, not the dominant framing. Schroders’ survey suggests investors are using active ETFs as flexible building blocks that can complement both core and satellite holdings.
When asked where they would most value active ETFs in portfolios, respondents pointed to:
- Diversification (49%)
- Tactical or satellite positioning (42%)
- Risk management (33%)
- Transition management (29%), effectively “parking” assets while changing allocations.
This supports a more practical way to think about active ETFs: not as “tactical only”, but as a toolkit for multiple portfolio jobs, going from diversification through to risk control and operationally efficient transitions.
3: “Active ETFs are opaque — you don’t know what you own”
A few years ago, concerns around transparency were more understandable, particularly when investors were comparing ETF trading with traditional active funds that disclosed holdings less frequently.
But in the UCITS active ETF market today, the idea that active ETFs are inherently opaque is increasingly outdated. Many active UCITS ETFs publish full holdings daily, including ours. That means you can see what you own each day, and in many cases with a level of frequency and granularity that goes beyond typical disclosure cycles in traditional funds.
Transparency is also showing up as an investor priority in our survey: 41% of respondents cited greater portfolio transparency as a key benefit of active ETFs.
Transparency isn’t a structural weakness of active ETFs. When properly delivered, it can make active exposures easier to monitor and manage.
Where demand is strongest and what concerns still need addressing
Our research also indicates demand for active ETFs is not uniform across exposures. Investors particularly value active expertise in areas that may be less researched, less efficient, or structurally more complex, including:
- Small and mid-cap equities (37%)
- Emerging market equities (35%)
- Thematic or sector strategies (34%)
- Liquid alternatives / hedge-fund-style strategies (23%)
At the same time, the survey highlights that some adoption barriers relate more to the manager and strategy than to the ETF structure itself. Key concerns included:
- Limited track record (34%)
- Uncertainty around performance versus traditional active funds (34%)
- Lack of transparency around the active process (31%)
- Complexity from derivative-based implementations and capacity or trading liquidity (30%)
This is an important reminder that the next phase of growth will depend on managers clearly articulating their investment process, demonstrating how the strategy is implemented within the ETF structure, and providing the transparency investors need to monitor exposures over time. We will focus on active ETFs due diligence in a follow-up article.
Separate the vehicle from the investment approach
Active ETFs are not a new investment philosophy. They are a way to access active management through a structure that can offer flexibility, transparency and control over implementation. The strategies may be familiar but what’s changed is the delivery mechanism, and with it the range of portfolio roles active strategies can play.
In markets characterised by volatility and uncertainty, that delivery can matter. Intraday tradability, clearer line of sight on holdings, and the ability to use one vehicle across multiple portfolio “jobs” can all support more resilient implementation without changing the fundamental objective of active management.
Témy