Active ETFs Surge Past Passive, and These Are in the Lead

Key Points

• Actively managed ETFs have seen significant acceleration of inflows in the last year, potentially signaling a shift in how investors approach this space.
• Two active funds that may be worth a closer look include CGDV and TCAF, with a focus on dividend value and a GARP approach, respectively.
• Other passive funds may reflect some aspects of active ETFs, such as IVES, which is based on an index but tied to the views of technology analyst Dan Ives.

Exchange-traded funds (ETFs) have traditionally been known for simplifying the investment process for non-professionals while keeping costs low through a passive management approach that tracks indices linked to different strategies. Oddly, though, actively managed ETFs—those not tied to any particular index but with portfolios curated by fund managers, causing them to generally have much higher fees—have grown at a faster pace than their passive peers. Goldman Sachs reports that inflows into active ETFs were about four times stronger than those for passive ETFs last year.

Active ETFs may have greater potential to capture alpha and may employ more complex, sophisticated investment strategies, both of which can appeal to more adventurous investors. Amid the flood of funds on the market today, two actively managed ETFs (and one that resembles an actively managed strategy) may stand out in particular.

CGDV Aims for Dividends and Price Appreciation Through an Active Approach

The Capital Group Dividend Value ETF NYSEARCA: CGDV aims for dividend income that exceeds the average yield on U.S. stocks, with a focus on large, established domestic firms and a secondary interest in large companies based outside of the United States. CGDV's managers diversify the portfolio across many sectors and industries, although information technology, industrials, and healthcare stocks dominate.

With at least 90% of its equity assets invested in stocks with issuer ratings of investment grade or better, CGDV aims to be a stable, secure source of income even if the market is facing turbulence. Its actively managed approach means it has maximum flexibility to adjust holdings amid shifting conditions, which may appeal to investors seeking a defensive strategy that is nimble and responsive.

Investors will find in CGDV's basket a group of just over 50 of the most solid dividend stocks, including names like Applied Materials Inc. NASDAQ: AMAT and Microsoft Corp. NASDAQ: MSFT.

With an expense ratio of 0.33%, CGDV is costlier than some passive ETFs focused on dividends. However, its one-year return of nearly 21%, combined with a dividend yield of 1.31%, may outweigh that cost.

TCAF's Core Equity Approach Combines Big Names With Lesser-Knowns

Using a core equity portfolio approach, the T. Rowe Price Capital Appreciation Equity ETF NYSEARCA: TCAF targets stocks using growth at a reasonable price (GARP) investing principles. The goal, then, is a combination of strong return possibilities and relatively lower risk compared to the broader market. TCAF's managers are not restricted by market capitalization or other metric requirements, and instead attempt to identify individual companies to build a portfolio in a "bottom-up" way.

The result is a group of about 100 companies screened for fundamental strengths, performance history, and potential for future growth. Investors might utilize TCAF as a core ETF to provide varied exposure to some of the biggest stocks in the United States for an expense ratio of 0.31%. Mixed in, however, are some firms likely to be less well-known to many retail investors, including companies like pharmaceutical distribution firm Cencora Inc. NYSE: COR.

All told, this basket of names has returned just over 10% in the last year, a bit shy of the broader market. However, investors may want to keep in mind that TCAF has seen an impressive surge in inflows in the last year, including almost $1.9 billion from institutional investors. This may make it worth a closer look for potential future gains.

A Non-Active Fund Mimicking an Active Approach

The race toward actively managed funds may have even contributed to a shift in approach for some passive ETFs as well. Take the Dan IVES Wedbush AI Revolution ETF NYSEARCA: IVES, which is passively managed and tracks an index of AI-related technology companies. The index itself is tied to Dan Ives, a well-known technology analyst at Wedbush Securities, and reflects his convictions on the growing AI space.

For an expense ratio of 0.75%—higher than most other passive funds—investors get access to an index based on Ives' selections.

Many of the roughly 30 holdings are big names in the tech space that investors may get access to via other, more traditional ETFs. However, IVES' unique weighting and multi-cap approach may distinguish the portfolio from other options.

A fund like this may appeal to investors familiar with Dan Ives' analysis and who subscribe to his optimism about the AI revolution.

As an ETF that only launched in June 2025, IVES does not have a substantial track record of performance, but it has already drawn close to $1 billion in assets under management and trades quite actively, with a one-month average trading volume of more than 500,000.