Active ETFs: A powerful combination of expertise and flexibility

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  Serge Nussbaumer
  Chefredaktor

Mr. Durdevic, proponents of passive ETFs argue that they offer flexibility and lower costs. What are the advantages of active ETFs?

Active ETFs combine the best of both worlds: the flexibility and transparency of traditional ETFs with the opportunities of active investment strategies. ETFs offer advantages such as daily tradability, high liquidity, low costs and – depending on the structure and domicile – tax efficiency.

Index funds existed before the ETF, but the real breakthrough came in 2008. I remember it well: I entered the industry on October 1, 2008 – and suddenly everyone wanted ETFs. Because what made the ETF so unique, apart from index replication, was its transparency and the ability to trade it flexibly on the stock exchange.

On the other hand, active strategies offer advantages such as outperformance, risk reduction or targeted income generation, depending on the objective. If these are combined with the strengths of the ETF, the result is a high-performance investment instrument. Particularly in the case of global equity ETFs, active solutions with a TER of just 0.25% are also an attractive alternative to passive products in terms of costs.

How is J.P. Morgan positioned in the market for active ETFs compared to competitors such as BlackRock or Vanguard?

J.P. Morgan Asset Management is clearly an active house – around 99% of our global assets under management are actively managed. In total, we manage over USD 3.6 trillion in client assets and invest more than USD 490 million annually in our active research. In equities alone, we have over 80 analysts covering more than 2,500 companies. A key advantage of our active ETFs is that they draw on the full expertise of our company – the research skills of our analysts, the know-how of our portfolio managers and the long-standing track record of our strategies. Most of these strategies have been in place for many years. For example, our US Research Enhanced Index ETF is based on a strategy with a track record of over 30 years. Our global Research Enhanced strategy, which has been in existence since 2003, also provides a reliable history. This enables us to show investors transparently how we work – with sound experience and measurable success.

A Scope analysis shows that only around one in five active ETFs outperforms its benchmark. exceeds. But what speaks for a an active ETF?

Active is not always active. Not every strategy aims to beat the benchmark – one example is our Equity Premium Income strategy, which targets current income with lower volatility.

Over a 10-year period, we were able to beat the median of the peer group with 88% of our assets under management – strong evidence of our management quality. For active strategies in particular, it is important to choose an experienced asset manager with a reliable track record. It is also worth taking a closer look at global indices, such as the MSCI World and FTSE World, whose composition and results can vary significantly in some cases.

How does the portfolio management of anof an active ETF compared to an actively managed fund?

It may come as a surprise, but it’s basically the same. Our active ETFs use exactly the same portfolio management team – with identical research and processes. Our portfolio manager manages the active ETF in exactly the same way as a product in a mutual fund wrapper or an institutional mandate. So nothing changes in the portfolio management itself – it is completely equivalent and unspectacularly identical. The only difference lies in the so-called creation-redemption process, which works differently for an ETF than for traditional mutual funds. However, this has no influence on the investment strategy itself.

How is transparency towards investors guaranteed with an active ETF?performs? Especially when it comes to discretionary strategies?

This is one of the major advantages of ETFs as wrappers: at J.P. Morgan Asset Management, we offer our UCITS ETFs with complete transparency. Every investor can call up the desired ETF on our website and view all positions in the portfolio on a daily basis. This openness is a key advantage of ETFs – exactly the aspect that became so important in 2008.

How does the daily pricing and liquidity of an active ETF affect management and trading costs?

At a client event with one of our Authorized Participants, the question arose as to whether there is a difference in quoting an active ETF compared to a passive one. The answer: there isn’t. Active and passive ETFs draw on the same market liquidity – for example in US equities, which trade at over USD 300 billion a day. Whether S&P 500 tracker or US Research Enhanced Index ETF – both use the same market depth. An ETF is always at least as liquid as its underlying market segment. This is also reflected in the spreads: In the first quarter of 2025, the average spread of our US Research Enhanced Index ETF was just 4.93 basis points – at the lower end of the range for North American equity ETFs.

What regulatory requirements apply to active ETFs in Europe and the USA and how do these influence product development at J.P. Morgan?

Of course, we adhere to the regulatory framework here in Europe – in particular the UCITS Directive. Our active ETFs meet all the requirements that apply to UCITS products. As already mentioned, they are essentially no different from traditional mutual funds – we simply implement our investment strategies in a different vehicle. In regulatory terms, the ETF is therefore simply an alternative vehicle. When selecting suitable strategies for ETFs, we pay particular attention to the underlying market liquidity. In markets with low liquidity or with very concentrated, active strategies with few securities, an ETF solution may not be sensible or practicable. In such cases, we deliberately decide against implementation in ETF format.

What are semi-transparent ETFs? What role do they play in J.P. Morgan’s ETF strategy?

We do not offer semi-transparent ETFs.

How do you see the future market development for active ETFs in Europe and Switzerland – especially in the institutional vs. private sector?

Our entry into active ETFs in Europe began in 2018, and we entered the Swiss market in April of the same year. At that time, the global market volume was USD 100 billion – today it is already around 1.2 trillion. Europe currently stands at around 60 billion, but is forecast to grow to 400 billion by 2030; globally, we expect up to 6 trillion. J.P. Morgan is the leader in active ETFs in Europe with a market share of over 50 %.

Interestingly, the first investors in our active ETFs came from Switzerland – true pioneers. Since then, demand has been growing continuously, also among private investors, both in Switzerland and throughout Europe. There is particularly strong demand for two strategies: Research Enhanced Indexing, which serves as an active replacement or supplement to traditional index solutions, and Equity Premium Income, which has recently gained strong momentum in the retail segment.

Which active ETF do you think in your portfolio?

Research Enhanced Indexing is a central building block – ideal as a replacement or supplement to passive allocations. Just a few basis points of additional alpha can make a noticeable difference in the long term, as the comparison of the MSCI World and our global strategy shows.

Another focus is on income-oriented solutions such as Equity Premium Income – one of our most successful strategies with a volume of over USD 65 billion worldwide, strongly established in the USA and now also in Europe. Active Fixed Income ETFs, which we call ActiveX Thinker, are also increasingly in demand. In Europe, around 79% of investors prefer active management in the bond sector. Combined with the efficiency of the ETF vehicle, this results in convincing added value – for example through the targeted management of duration and credit risks. One example is our Global Aggregate ETF, also available in CHF-hedged.

Thank you very much!

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Ivan Durdevic, Executive Director, is Head of ETF Distribution/Head of ETF Distribution for Germany, Austria and Switzerland at J.P. Morgan Asset Management. In this role, based in Zurich, he is responsible for the development of the ETF business in the three countries. Before joining J.P. Morgan Asset Management in 2018, he worked at Amundi for more than seven years, initially as Senior Client Relationship Manager for ETFs and index products in Germany and most recently as Deputy Head of Sales for ETFs, index and smart beta products in Switzerland. Prior to this, he was Senior Business Development Associate at BlackRock in Germany for iShares products, where he built up and expanded the ETF business, and at NOMURA Bank Germany in sales for equity products. A graduate in business administration, he began his career at INVESCO in Germany.