Are Active ETFs Right for You?
Learn about active exchange-traded funds (ETFs) and their potential benefits, characteristics, and comparisons with other investment vehicles like mutual funds and separately managed accounts (SMAs).
Explore Full PDF
5/8/2026
5 min read
Topic
ETFs
Key takeaways
- Actively managed ETFs combine the potential for outperformance with features like tax efficiency and intraday tradability.
- When evaluating investment vehicles, factors such as cost, transparency, and customization capabilities can help shape your decision.
- Each investment option—ETFs, mutual funds, or SMAs—offers distinct characteristics to suit different investor needs.
Executive summary
Benefits of actively managed ETFs
Actively managed exchange-traded funds (ETFs) can offer investors outperformance potential and active risk management combined with the traditional benefits of ETFs. Active ETF users can gain access to experienced investment teams and established strategies while maintaining ease of access and trading flexibility.
Active ETFs vs. mutual funds and SMAs
Active ETFs offer a differentiated mix of tax efficiency, lower cost potential, and intraday tradability. Compared with mutual funds and separately managed accounts (SMAs), they typically deliver transparency, liquidity, and diversified strategy access within a single vehicle.
Are active ETFs right for you?
For investors seeking the potential advantages of ETFs combined with active management, active ETFs may offer a compelling solution. With benefits such as tax efficiency, intraday trading, and access to expert portfolio management services, active ETFs can help investors align investment choices with their financial goals.
Frequently asked questions (FAQ)
- What is an active ETF?
An active ETF is an ETF that is actively managed by professional investment teams with the goal of outperforming the market or a benchmark rather than simply tracking an index.
- What potential benefits do active ETFs offer?
Active ETFs may offer outperformance potential, tax efficiency, intraday tradability, daily holdings transparency, diversification, ease of access, and typically lower costs compared with some other investment vehicles.
- How do active ETFs compare with mutual funds?
Unlike mutual funds, which trade once daily at net asset value (NAV), active ETFs trade intraday on an exchange with real-time pricing. ETFs are also generally more tax-efficient, while mutual funds may appeal to investors who prefer end-of-day pricing and no vehicle trading costs.
- How do active ETFs differ from separately managed accounts (SMAs)?
SMAs offer customization and direct ownership of securities but usually require higher investment minimums. Active ETFs provide diversified, professionally managed portfolios with lower minimums and easier access, though with less customization than SMAs.
- Who might consider an active ETF?
Active ETFs may be suitable for investors seeking potential outperformance, tax benefits, intraday trading flexibility, portfolio transparency, and cost efficiency in a single, packaged investment vehicle.
Related insights
As head of ETF Capital Markets for Allspring, Molly Landes leads strategic relationships with key trading partners, overseeing the quality and efficiency of Allspring’s exchange-traded fund (ETF) trading business. Both the spirit of competition and ETFs are part of Molly’s DNA.
All investing involves risks, including the possible loss of principal. There can be no assurance that any investment strategy will be successful. Investments fluctuate with changes in market and economic conditions and in different environments due to numerous factors, some of which may be unpredictable. Each asset class has its own risk and return characteristics.
It is possible that an active trading market for ETF shares will not develop, which may hurt your ability to buy or sell shares, particularly in times of market stress. Shares may trade at a premium or discount to their net asset value (NAV) in the secondary market. These variations may be greater when markets are volatile or subject to unusual conditions. There can be no assurance that active trading markets for the shares will develop or be maintained by market makers or authorized participants. Shares of the ETFs are not redeemable with the ETF other than in creation unit aggregations. Instead, investors must buy or sell the ETF shares in the secondary market at market price (not NAV) through a broker-dealer. In doing so, the investor may incur brokerage commissions and may pay more than NAV when buying and may receive less than NAV when selling. Investing involves risk, including the possible loss of principal. Consult a fund’s prospectus for additional information on these and other risks.
Allspring ETFs are not available for distribution outside of the United States.
This material is for general informational and educational purposes only and is NOT intended to provide investment advice or a recommendation of any kind—including a recommendation for any specific investment, strategy, or plan.
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