Is demand for active ETPs genuine beyond outlier conversions?

As the active exchange-traded product (ETP) market continues to grow, new Rainmaker Information research asks whether demand has genuinely improved or if it is underpinned by conversions from three investment managers delivering "three exceptional months of work"?

Rainmaker's newly published Active ETPs: Beyond the 2024 Conversion Spike report found that several large fund conversions to ETFs bought billions of inflows, yet it is now difficult to determine whether growth reflected genuine investor demand.

The shift to positive active flows occurred in April, June and July of 2024.

This is thanks to Franklin Templeton listing an active ETF class for two flagship managed funds on the ASX; Lazard launching its first Australian ETF and enabling access to Global Listed Infrastructure Fund listed on Cboe; and Magellan converting its closed class of its Global Fund into open ASX-quoted units.

Furthermore, active ETP flows remained positive through 2025 and into early 2026, with net inflows per dollar managed moving well above the weak rates recorded in 2022 and 2023.

While conversions lifted the numbers, the research found that removing the outlier months still produced healthy flows.

"Per dollar managed, active attracted about +1.5pp more net inflow per month in 2024-26 than in 2022-23, rising from -0.2% to 1.3% of FUM. Conversion events explain part of the lift: excluding the three largest conversion months leaves about +0.9pp. Against index funds, the flow-rate gap widened by about +1.0pp per month in favour of active funds, though index funds continue to win most new dollars in absolute terms," the report read.

For product issuers and distribution teams, the findings suggest investors are increasingly receptive to accessing active strategies through the ETP structure, which "supports the commercial case" for both ETF launches and managed fund conversions.

Between 2019 and 2021 the ETP market grew and active products drew modest positive flows.

However, interest rate hikes in 2022 hit investors' risk appetite and subsequently, active flows weakened.

While demand in 2023 was mixed, the sector hit a turning point from 2024 thanks to several exchange listings of existing funds contributing to the growing market.

Rainmaker estimates the ETP market surpassed $318 billion at the end of June.

At the end of the 2025 financial year, market-cap index products accounted for the majority of total FUM at 83%. Smart-beta products represented 11%, while active products accounted for 6%.