Active ETFs are growing fast, with many UK investors beginning to explore how they can complement a passive investing approach.
In this guide, we’ll break down what active ETFs are, why they are attracting attention, and how you can use them alongside your existing portfolio.
We also highlight several globally recognised providers whose active ETFs are available on InvestEngine, and explain what to look for when comparing options.
What is an active ETF?
Most investors are familiar with passive ETFs. These track an index such as the S&P 500 and aim to match its performance at a low cost.
Active ETFs work differently. Instead of simply tracking an index, a fund manager makes decisions about where to allocate money inside the ETF. Their aim is to outperform a benchmark or passive equivalent.
This hands-on approach has contributed to rising interest. Morningstar data shows active ETFs grew by around 48% in 2023, while BlackRock reports that in 2024, roughly 41% of newly launched ETFs were active.
Investors are drawn to the idea of potential outperformance, while still benefiting from the transparency and structure that ETFs are known for.
Edward Malcolm, Co-Head of EMEA ETF Distribution, J.P. Morgan Asset Management, said this: “Active ETFs are changing the way investors think about portfolio construction.
“They offer the flexibility and transparency of traditional ETFs, but with the added benefit of professional management aiming to deliver outperformance versus the relevant benchmark. For many clients, active ETFs are a powerful way to diversify and adapt to evolving market opportunities.”
Three active ETF providers available on InvestEngine
InvestEngine partners with a range of respected fund managers. Below, we highlight three globally recognised providers whose active ETFs you can access on the platform: J.P. Morgan Asset Management, Fidelity and ARK Invest.
J.P. Morgan Asset Management: high-conviction active strategies
J.P. Morgan is one of the world’s largest asset managers, with deep research capabilities and decades of active investing experience. Their active ETFs blend fundamental research with quantitative insights, aiming for consistent long-term returns.
A popular example on InvestEngine is the J.P. Morgan Global Equity Premium Income ETF. This ETF combines global equity exposure with an options-based income strategy, aiming to provide smoother returns and regular income distributions.
J.P. Morgan’s active range tends to focus on high-conviction stock selection, disciplined risk management and a clear investment process backed by a large analyst team.
Fidelity: research-led active management
One example from Fidelity’s range is the Fidelity US Equity Research Enhanced ETF.
This is an actively managed, accumulating ETF. Any dividends generated are reinvested back into the fund. Like other active ETFs, it aims to outperform an equivalent index such as the S&P 500.
Fidelity’s team adjusts company weightings based on their own analysis. For example, they may choose to allocate more to Nvidia than a typical S&P 500 tracker. These small adjustments aim to capture additional growth opportunities that a passive ETF does not actively seek.
ARK Invest: backing the technologies of tomorrow
ARK Invest is known for researching emerging technology themes. Led by Cathie Wood, the firm focuses on areas such as artificial intelligence, robotics, genomics, cybersecurity and long-term innovation.
One ETF available on InvestEngine is the ARK Artificial Intelligence and Robotics ETF, which invests in companies building AI-related hardware, software and infrastructure. This includes businesses producing semiconductors, automation systems and the technology powering the AI boom.
ARK’s approach centres on identifying future trends early, aiming to capture growth over the long term.
These three managers offer a broad mix of approaches and risk levels, giving investors multiple ways to add active management to a diversified portfolio.
How active ETFs can work in a blended investing approach
A lot of investors wonder whether they need to choose between active and passive investing. In reality, you can use both.
A blended approach simply means splitting your portfolio between passive ETFs and active ETFs in a proportion that suits you.
For example:
- 70% passive/30% active
- 50/50
- or the reverse, with a higher allocation to active funds
There is no one-size-fits-all mix. The key is ensuring the balance fits your goals, timeframe and comfort with risk.
Passive ETFs offer broad, low-cost exposure. Active ETFs allow fund managers to seek opportunities that may outperform. Used together, they can complement each other and diversify your strategy.
Understanding the costs of active ETFs
Because active ETFs involve fund managers and research teams, their fees tend to be higher than those of passive ETFs.
Typical ongoing charge ranges are:
- Passive ETFs: around 0.1% to 0.2%
- Active ETFs: usually between 0.4% and 2.5%
However, the ranges overlap. It is possible to find active ETFs with lower fees than certain passive funds.
Cost matters, but it should not be the only factor. Consider the ETF’s investment approach, risk level, underlying holdings and how it fits with your long-term goals.
Do your research
If you are considering adding active ETFs to your portfolio, take a few minutes to explore the range available from the likes of Fidelity, ARK and J.P. Morgan Asset Management on InvestEngine. Look at:
- The ETF’s objective
- The companies it invests in
- The total expense ratio (TER)
- Whether the strategy complements your current portfolio
- If the theme aligns with your long-term plan
The right mix will be different for every investor.
Final thoughts
Active ETFs offer another way to build a diversified portfolio. They combine the benefits of an ETF structure with the expertise of professional managers who aim to outperform markets.
They will not suit everyone, and they come with higher fees than passive funds. But for investors looking for a blend of approaches, active ETFs can add an extra dimension to a long-term investing strategy.
If you want to explore the full range, you can view active ETFs from Fidelity, ARK and J.P. Morgan directly in your InvestEngine account.
FAQs on active ETF investing
1. What is an active ETF? An active ETF is a fund where professional managers decide how to allocate money inside the ETF. Their aim is to outperform a benchmark, rather than simply track an index like the S&P 500.
2. How is an active ETF different from a passive ETF? A passive ETF follows an index and aims to match its performance at low cost. An active ETF involves hands-on decision-making by a fund manager, which means fees are higher but there is potential for outperformance.
3. Why are active ETFs becoming more popular? Active ETFs grew rapidly in 2023 and 2024, helped by investor interest in strategies that aim to beat the market while still offering the transparency and convenience of the ETF structure.
4. Which active ETF providers can I access on InvestEngine? InvestEngine offers active ETFs from globally recognised managers including J.P. Morgan Asset Management, Fidelity and ARK Invest. Each has a different approach, from high-conviction stock selection to research-driven analysis and future-focused innovation themes.
5. What are some examples of active ETFs available? Examples include the J.P. Morgan Global Equity Premium Income ETF, the Fidelity US Equity Research Enhanced ETF, and the ARK Artificial Intelligence and Robotics ETF. These cover different regions, themes and investment styles.
6. Can active ETFs sit alongside passive ETFs in a portfolio? Yes. Many investors use a blended approach, combining passive ETFs for broad, low-cost market exposure with active ETFs for potential outperformance or thematic ideas. The balance will depend on your goals and appetite for risk.
7. Are active ETFs more expensive than passive ETFs? Active ETFs usually have higher ongoing charges, often between 0.4 percent and 2.5 percent, compared to 0.1 percent to 0.2 percent for many passive ETFs. Costs vary across providers, so comparing the total expense ratio is important.
8. What should I look for when choosing an active ETF? Check the ETF’s objective, the companies it invests in, the investment approach, its ongoing charges, and whether it complements the rest of your portfolio. It is also worth considering how the strategy fits with your long-term plan.
9. Are active ETFs suitable for every investor? Not necessarily. Active ETFs come with higher fees and may be more volatile than broad passive funds. Whether they fit your strategy will depend on your goals, timeframe and comfort with risk.
10. How can I explore active ETFs on InvestEngine? You can browse active ETFs from providers such as Fidelity, ARK Invest and J.P. Morgan directly in your InvestEngine account. Each ETF page includes details on objectives, holdings and fees to help support informed decision-making.
Important information
Capital at risk. The value of your portfolio with InvestEngine can go down as well as up, and you may get back less than you invest. ETF costs also apply.
This communication is for general information only and is not financial advice. If you are unsure about investing, please seek advice from a qualified professional.
Tax treatment depends on personal circumstances and may change in future. Past performance is not a reliable indicator of future results.