Active strategies a different story in ETFs: MSCI

Despite continuous underperformance from active fund managers in recent years, MSCI's new report highlights the sentiment is drastically different when it comes to actively managed exchange-traded funds (ETFs).

Australian advisers are increasing their use of active ETFs, looking beyond their home market for growth and weighing how far the ETF structure can stretch, according to MSCI's ETF Intelligence Report 2026.

Based on a survey of 75 investment professionals in Australia, as well as advisers the US and Europe, active ETF demand is moving beyond developed markets, sitting highest for multi-assets (51%), emerging markets (49%) and thematic strategies (47%), despite current use being concentrated in US equities (59%) and other developed markets (48%).

Advisers already allocate an average 50/50 split between Australian and international equities. Some 67% plan to increase that international allocation further, with 40% expecting to focus more on emerging markets, the report said.

Most Australian advisers (95%) use active ETFs, despite more than three-in-five (61%) expecting to increase their passive allocations ETFs, and 55% are looking to increase the use of managed funds.

MSCI head of Asia Pacific Shane Edwards said the growth in active ETF allocations does not come at the expense of managed funds.

"ETFs are firmly established in the Australian investment toolkit, and their role is likely to keep growing. Active ETFs are an important part of that growth story, bringing a wider range of investment strategies and exposures into the structure," MSCI head of Asia Pacific Shane Edwards said.

"Looking closely at where demand is building, where advisers see room to broaden the toolkit and how investor needs are changing can bring greater clarity to where the market may develop next."

MSCI said the growth in active ETFs is not coming at the expense of managed funds, which differs from the shift away from managed funds seen among US and European peers.

However, MSCI global head of index Jana Haines said passive ETFs remain the foundation of most portfolios "but active ETFs are increasingly becoming mainstream."

"What we are seeing is a shift from whether advisers will use active ETFs to where the structure delivers the most value," Haines said.

"As the ETF market enters a more mature phase, advisers are also asking harder questions about the product's fit. The opportunity lies not just in providing more choice, but in knowing where the structure adds value, where its limits lie and what it takes to earn a place in the portfolio."

Meanwhile, the price also differentiates ETF preference, with 92% primarily use, or favour, a small set of preferred ETF managers, and an index provider influences the final choice for 80% of advisers.

More than half (52%) would pay a premium for difficult-to-access exposures, and fees, while still the most cited selection criteria (59%), do not decide the outcome alone.

However, advisers are becoming more cautious about the coverage of ETFs, with just over half (51%) open to accessing private or illiquid assets through an ETF. Only 17% were very open, with 59% citing a liquidity mismatch as the main concern.

Tokenisation, on the other hand, drew a warmer reception, with 59% of those familiar with it seeing value in tokenised ETF structures, a higher share than among US and European advisers, MSCI noted.