Why Active ETFs Have Experienced Significant Growth

The regulatory shift, the structural advantages, and the numbers behind active ETFs’ breakout, and where Clough Capital fits.

Key Takeaways

Active ETFs have moved from a niche experiment to one of the fastest-growing segments of asset management. By the end of 2025 they held roughly $1.5 trillion in assets and drew close to a third of all ETF flows, despite representing only about a tenth of total ETF assets.²
The boom has a clear cause. A 2019 SEC rule put active and passive ETFs on the same regulatory footing, and the structural advantages of the wrapper, liquidity, transparency, and tax efficiency, made it a natural home for actively managed strategies.
Active management inside an ETF is still active management. It carries higher fees than indexing and no guarantee of outperformance. The case rests on manager skill, paired with a structure that makes that skill easier to evaluate and to own.

A Category That Went Mainstream

For most of ETF history, “ETF” was effectively a synonym for “index fund.” That is no longer true. The number of actively managed ETFs available to U.S. investors has caught up with, and by recent industry counts now exceeds, the number of passive ETFs.

The asset growth tells the same story. According to a February 2026 staff study from the SEC’s Division of Economic and Risk Analysis, active ETF assets grew from $122 billion at the end of 2020 to $768 billion at the end of 2024, an average of roughly 65% a year, several times the growth rate of passive ETFs over the same period.¹ By the end of 2025, industry data put active ETF assets at about $1.5 trillion, close to 11% of the U.S. ETF market.²

Active ETF assets, year-end (US$ billions). 2020 to 2024: SEC Division of Economic and Risk Analysis (Feb 2026); 2025: Morningstar industry estimate.

Flows make the momentum concrete. Active ETFs took in a record of roughly $459 billion of net new money in 2025, about 31% of all ETF flows, even though they accounted for only around a tenth of ETF assets.² A record of close to 962 active ETFs launched during the year, about 85% of all new ETF launches.² The pace carried into 2026, with first-quarter flows setting fresh records and active strategies continuing to anchor new launches.³

A tenth of assets, a third of flows (2025): active ETFs took roughly 31% of net ETF flows while holding about 11% of ETF assets. Source: Morningstar (2026).

Why Now: The Regulatory Door Opened

None of this happened by accident. The path was cleared in stages. The SEC approved the first active ETF in 2008. In 2016 it adopted generic listing standards that let exchanges list qualifying active ETFs without case-by-case approval. The pivotal step came in 2019, when the SEC adopted Rule 6c-11, known as the ETF Rule.

Before Rule 6c-11, every ETF needed individual exemptive relief from the SEC, a slow and costly process. The rule replaced that with a single set of conditions any qualifying, fully transparent fund could meet, active or passive. In doing so it put actively managed ETFs on the same footing as index ETFs and removed the single biggest barrier to entry. The surge in launches since 2019 follows directly from that change.

The regulatory story is still being written. In late 2025 the SEC began granting a separate form of relief that lets a fund offer an ETF share class alongside traditional mutual fund shares, with Dimensional receiving the first such order in November 2025 and others following into 2026.⁴ These share-class structures sit outside Rule 6c-11 and require their own approval, and the industry expects the first conversions to reach the market around the middle of 2026. For active managers, it is one more signal that the ETF has become a default vehicle for delivering strategies to investors.

Why the Wrapper: Liquidity, Transparency, Tax Efficiency

Regulation opened the door. The ETF structure itself is why managers and investors walked through it. Three features matter most:

Liquidity. ETFs trade on an exchange throughout the day, and an ETF’s tradable size is tied to the liquidity of its underlying holdings, not just to its on-screen volume.
Transparency. Most active ETFs publish their full holdings every day. That lets an investor see exactly what a manager owns, a clear contrast with the quarterly disclosure of a typical mutual fund.
Tax efficiency. The in-kind creation and redemption mechanism can help an ETF limit the capital gains distributions that often accompany comparable mutual funds.

These are the same structural advantages that passive ETFs made familiar. Pairing them with active management is what investors have responded to.

Why Active: Skill Inside the Structure

An index fund is built to match the market. An active manager is trying to do better than the average, selecting securities through research, adjusting exposures as conditions change, and managing risk deliberately rather than holding whatever the index holds. That work is where active ETFs earn their place in a portfolio, and it tends to matter most when market leadership is narrow or when the gap between winners and losers is wide.

It also costs more. Active ETFs carry higher fees than index ETFs, by roughly 25 to 37 basis points on average according to the SEC staff study, and there is no guarantee that an active manager will outperform. The case for paying that fee rests on manager skill and process, evaluated over multiple market cycles. The ETF wrapper does not change that calculus. What it does is make the manager’s holdings visible every day, so investors can judge whether the strategy is doing what it says.

At Clough Capital

Clough Capital has been an active manager since 1999, with a research-driven, conviction-led approach developed across more than two decades of market cycles and applied in closed-end fund and institutional formats long before active ETFs became a category.

The firm was also early to the wrapper itself. The Clough Hedged Equity ETF (CBLS) and the Clough Select Equity ETF (CBSE) were among the first actively managed ETFs listed on the NYSE, in 2020, well before the category’s recent surge. Both are fully active, both publish their holdings daily, and both reflect the firm’s view that security selection and thematic positioning, guided by macro context, are durable sources of value through different market regimes. As the firm’s tagline puts it: always active, never passive.

The active ETF boom is, in part, the rest of the industry arriving where Clough already was.

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Sources

Superscript numbers in the text above refer to the numbered sources below.

U.S. Securities and Exchange Commission, Division of Economic and Risk Analysis, “The Fast-Growing Market of Active ETFs” (February 2026). Active ETF asset growth ($122B in 2020 to $768B in 2024), regulatory history (2008 first active ETF, 2016 listing standards, 2019 Rule 6c-11), and the active-versus-passive expense gap (about 25 to 37 bps). https://www.sec.gov/files/dera-fast-growing-mrkt-2602.pdf
Morningstar, “Active ETFs: 9 Charts on a Record Year” (2026). 2025 active ETF assets (about $1.5 trillion, roughly 11% of the U.S. ETF market), record net flows (about $459 billion, roughly 31% of ETF flows), record launches (about 962, roughly 85% of new ETFs), and active ETFs surpassing passive in number. https://www.morningstar.com/funds/active-etfs-9-charts-record-year
InvestmentNews, “Active ETFs dominate US product launches as closures stay in check” (2026). First-quarter 2026 launch and flow momentum. https://www.investmentnews.com/etfs/active-etfs-dominate-us-product-launches-as-closures-stay-in-check/267083
Dimensional Fund Advisors, “Dimensional Receives SEC Approval for ETF Share Classes” (November 2025), and SEC exemptive orders for subsequent applicants in 2026. ETF share-class relief outside Rule 6c-11. https://www.dimensional.com/us-en/newsroom/dimensional-receives-sec-approval-for-etf-share-classes

Important Disclosures

Investors should consider the investment objectives, risks, charges, and expenses carefully before investing. This and other information are contained in the prospectus, which may be obtained by visiting www.cloughcapital.com/etfs or by calling 855-393-0559. Please read the prospectus carefully before you invest.

Active management involves higher fees and the risk of underperformance relative to passive alternatives. There is no guarantee that an active strategy will outperform its benchmark or that any investment objective will be achieved. The success of an actively managed strategy depends on the portfolio manager’s skill, research process, and judgment, all of which involve risk.

Performance represents past performance and does not guarantee future results. Investment returns and the principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.

The Clough Capital ETFs are distributed by Paralel Distributors, LLC. Paralel Distributors, LLC and Clough Capital are not affiliated.

This material is for informational and educational purposes only and does not constitute investment advice or a recommendation to buy or sell any security. The views expressed represent the opinions of Clough Capital Partners and are subject to change. Statistics on the active ETF market are drawn from third-party and regulatory sources believed to be reliable and are subject to revision.

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