For years, ETFs have been synonymous with passive investing – low-cost, transparent, and liquid vehicles tracking broad market indices. But the narrative is shifting. Active ETFs are no longer a niche innovation; they’re a structural evolution in how portfolios are built, managed, and optimized for performance.
At Columbia Threadneedle Investments, we believe Active ETFs represent a fundamental change in the investment landscape – not a passing trend. They offer a compelling solution for cost-sensitive clients who still demand outperformance, blending the best of active management with the efficiency of the ETF wrapper.
Why now? The market is ready
The ETF market has matured rapidly. In Europe alone, assets are forecast to exceed $2.8 trillion by the end of 2025. While passive ETFs still dominate, the rise of Active ETFs is unmistakable. In 2024, European actively managed ETFs attracted €19.1 billion – nearly triple the inflows of the previous year1.
This isn’t solely about product innovation. It’s about investor demand. According to Citywire’s World of ETFs survey, 57% of professional investors now view Active ETFs as core holdings, not just tactical plays. And while allocations remain modest, 73% of respondents are increasing their exposure, particularly in fixed income and developed market equities2.
Performance meets purpose
Active ETFs challenge the old trade-off between cost and alpha. But this isn’t about being ‘low cost’ it’s about being cost-efficient – delivering value through thoughtful design, scale, and innovation. The ETF wrapper enables transparency, liquidity, and cost efficiency, while active management brings the potential for outperformance.
At Columbia Threadneedle, we’ve already demonstrated strong alpha through our Active ETF strategies in the US. Now, EMEA clients are asking for the same strategies – delivered in a format that aligns with European regulatory frameworks.
Blending strategies: a smarter way to build portfolios
Investors are increasingly blending active and passive strategies to meet client expectations for performance within acceptable fee thresholds. Active ETFs offer a flexible middle ground – enhancing alpha potential without compromising on cost discipline.
Here are some examples of how Active ETFs can be deployed across portfolio strategies:
Objective | How | Why |
|---|---|---|
Boost alpha potential | Use Active ETFs alongside or instead of passive ETFs. | Adds scope for higher risk-adjusted returns at scalable, efficient cost. |
Manage ‘active’ costs | Replace high-fee active funds with cost-effective Active ETFs. | Balances pricing constraints with alpha potential. |
Enhance client value | Counter the ‘push to passive’ with research-driven, sophisticated Active ETFs. | Delivers value in both cost and investment outcomes. |
Balance style exposures | Use style-agnostic Active ETFs to offset concentrated style biases. | Reduces unintended portfolio tilts and improves diversification. |
Meeting real-world needs
The Citywire survey reveals that investors are actively replacing both passive ETFs and mutual funds with Active ETFs. Why? Because they want efficient access to complex strategies, better liquidity, and the ability to respond dynamically to market conditions.
Moreover, systematic and high-conviction strategies are gaining traction. Respondents are particularly drawn to enhanced index as well as high active share equity exposures, showing that investors want to strike their own balance between broad market coverage and alpha generation.
The Columbia Threadneedle Edge
Our ETF philosophy focuses on delivering strategies that align with what investors are asking for:
- Rules-based consistency through a systematic approach
- Conviction in our research to avoid benchmark-hugging
- Human-led adaptability via fundamentally informed research
- Core regional exposures that meet long-term and opportunistic needs
Our Active ETF understanding is both global and local – leveraging our long-standing US expertise and European client relationships for a seamless transition across wrappers. UCITS-compliant structures meet the regulatory and operational needs of European investors without compromising on strategy integrity.
Conclusion: a new chapter begins
Active ETFs are not just another product – they’re a new way to think about portfolio construction. They empower investors to build smarter, more responsive portfolios that meet the dual demands of cost-efficiency and performance.
At Columbia Threadneedle, we’re proud to be part of this evolution.
