Active ETFs surge despite market highs as macro clouds linger

Investors appear to be leaning more heavily into active ETFs even as markets continue to notch record highs, due to an uncertain economic backdrop.

The latest Janus Henderson ETF Pulse report, published this week, notes that US equity indices pushed to new highs in the third quarter, powered largely by technology stocks. At the same time, “macro risks remain elevated due to ongoing tariff rhetoric and geopolitical uncertainty,” and half of the asset manager’s closely tracked recession indicators have hit cautionary thresholds.

The firm says that active ETFs have “punched above their weight in attracting flows,” growing assets by 38% year-to-date compared with just 6% for passive funds, and more than 80% of ETF launches this year have been actively managed.

However, while flows are strong, the market is selective with new offerings often relatively small, with median AUM below $120 million in the first three years.

Growth has been balanced across equities and fixed income, signalling sustained investor appetite for strategies that go beyond traditional indexing.

The report draws attention to rising diversification risk as a handful of mega-cap names take on an outsized presence in major benchmarks. Seven companies now represent 52% of the Russell 1000 Growth Index, underscoring how concentrated portfolios have become.

While dominant players continue to benefit from strong profitability and AI tailwinds, the report cautions that “historically this has been more of the exception than the rule,” with past winners often failing to maintain leadership. Janus Henderson argues that quality-focused stock selection and exposure to new disruptors could help mitigate volatility tied to index concentration.

Beyond equities, the firm sees growing opportunity in fixed income, particularly in areas advisors may overlook.

Emerging market hard-currency sovereign bonds now offer yields comparable to US high yield while maintaining stronger credit fundamentals than their label implies. Roughly 50% of the asset class is investment grade, and many issuers have benefited from IMF backstops. However, US portfolios allocate less than 1% to EM debt on average.

Securitized credit - covering asset-backed securities, CLOs and commercial mortgage-backed bonds -is another segment the report says can add diversification. These structures often maintain high-grade credit exposure while delivering spreads competitive with corporate debt, despite being underrepresented in major benchmarks.

With interest rate volatility persisting and global yield curves steepening, Janus Henderson frames flexibility as an essential feature of ETF portfolio construction going into year-end. “Markets don’t stand still — and neither should your ETF strategy,” the report says.