Professional investors are increasingly looking towards active exchange-traded funds (ETF) over other investment vehicles, according to Fidelity International’s Professional Investor DNA Survey.

According to Morningstar data, the European ETF market surpassed $2trn in assets under management for the first time in 2024.

However, active ETFs remained “relatively under-represented”, accounting for just 3 per cent of the overall European ETF market.

Despite this, the European active ETF market increased from $38bn to $64bn in 2024, according to figures from Morningstar.

Fidelity’s survey of professional investors, in partnership with Crisil Coalition Greenwich, found that 24 per cent of respondents were already utilising active ETFs.

Demand for active ETFs appeared set to rise more quickly than other investment vehicles over the next 18 months, as 37 per cent of investors expected an increase in their allocations.

Intermediary investors were found to have shown the most interest in active ETFs, with 61 per cent anticipating an increase in usage in their portfolios over the next 18 months.

By comparison, 29 per cent of professional investors expected an increase in allocations to passive ETFs, 26 per cent to index trackers, 21 per cent to active open-ended funds, and 10 per cent to LTAFs/ELTIFs.

The most commonly cited reason for using active ETFs were to reduce costs (58 per cent), generate alpha (50 per cent), access specialist areas (42 per cent), and their performance track record (38 per cent).

“The anticipated growth in investor allocation to active ETFs identified in our survey reflects the evolving preferences of investors,” said Fidelity International global head of ETFs, Alastair Baillie Strong.

“There is growing investor awareness of the benefits of active ETFs; combining the advantages of traditional active funds: flexibility, potential for outperformance; and those of ETFs: lower costs, transparency and ease of access.

“PWC expects the global ETF market to grow to $20tn in assets under management by 2030, a 17 per cent compound average growth rate4, and we anticipate that active ETFs will grow even faster, increasing their share as more investors discover their benefits.

“Looking ahead, we face a backdrop of ongoing complexities in the market which can be characterised by high valuations and various uncertainty factors. Given this backdrop, ETF selection is more important than ever.”

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