ETF market shifts toward active management and equal-weight strategies

The exchange-traded fund (ETF) market is experiencing a significant shift in investor preference toward active management and equal-weight strategies. Active ETFs have seen a substantial rise in popularity, capturing approximately 42% of dollar inflows into the ETF market, up from 26% in 2024. Despite representing only about 13% of total assets under management, active ETFs recorded inflows between $450 billion and $460 billion in 2025.

Simultaneously, investors are moving away from concentrated mega-cap technology bets in favor of equal-weight ETFs to mitigate concentration risk. The Invesco S&P 500 Equal Weight ETF (RSP) has surpassed $100 billion in assets under management, driven by more than $12 billion in net assets this year. This trend comes as the dominance of the ‘Magnificent Seven’—including companies like Nvidia, Apple, and Microsoft—begins to face scrutiny due to their disproportionate impact on market-cap-weighted indexes.

Key drivers for the growth in active ETFs include tax efficiency through in-kind creation and redemption mechanisms, as well as real-time liquidity and transparency. Major issuers benefiting from these trends include JPMorgan, Dimensional Fund Advisors, and Capital Group.