Nearly 1,000 new active exchange-traded funds launched last year, marking a jump of more than 50 per cent from 2024 as assets continue shifting away from traditional mutual funds. The rapid expansion is reshaping how investors access bonds, equities and even private credit markets heading into 2026.
BNN Bloomberg spoke with Ricky Williamson, head of investments and multi-asset strategies at Morningstar, about the growth of active ETFs, the rise of private credit exposure inside ETF structures and the appeal of low-cost, targeted country funds.
Key Takeaways
- The global ETF market now includes roughly 17,500 products, with U.S.-listed ETFs holding about US$13 trillion — roughly one-third of the U.S. fund market — and European ETFs surpassing €2.5 trillion.
- Active ETFs have grown rapidly, rising from two per cent of U.S. ETF assets in 2019 to about 11 per cent, supported by cost advantages and tax efficiency, though long-term growth will depend on performance.
- ETFs blending public and private credit aim to broaden retail access to private markets, but liquidity risks during credit stress make investor education and due diligence critical.
- Derivative income and covered call ETFs continue to attract assets as investors seek yield, though these strategies can cap upside and carry structural complexity.
- Low-cost, targeted exposures — including core bond ETFs priced around 10 basis points and country-specific equity ETFs as low as nine basis points — are gaining favour among asset allocators seeking precise portfolio control.
Read the full transcript below:
LINDSAY: And now it’s time for the ETF report. Our next guest notes that nearly 1,000 new active ETFs hit the market last year. That’s a jump of more than 50 per cent from 2024, and he expects that momentum to continue. Joining me now is Ricky Williamson, head of investments and multi-asset strategies at Morningstar. It’s good to have you with us. Thanks so much.
RICKY: Thank you for having me.
LINDSAY: What are you attributing that 50 per cent increase to?
RICKY: I think part of it is the decline in mutual funds. People have seen a push for lower-cost active management, especially on the equity side, not always delivering. Then there are the advantages of ETFs — transparency, tax advantages and potentially lower costs. That’s creating a tailwind toward ETFs. Of course, they still need to perform well, so we’ll see how many of these exist five years from now. But certainly there’s strong momentum behind this trend moving forward.
LINDSAY: You just mentioned some of the benefits of ETFs. What’s driving their popularity with investors?
RICKY: A lot of it is what I just mentioned. On the passive side, there’s been an inability of many active managers to outperform their benchmarks. Investors are seeing the benefit of going passive, in addition to the active ETF trend. Again, tax advantages, transparency and generally lower expense ratios have created momentum toward ETFs.
LINDSAY: For someone new to trading ETFs, what should they know?
RICKY: You need to do the same due diligence you would on an active mutual fund. Understand how active the ETF will be, or if it’s passive, what index it tracks. Liquidity is important. Look at the bid-ask spread and the costs to create and redeem shares. There are trading dynamics with ETFs that aren’t necessarily relevant to mutual funds.
LINDSAY: When we’re talking about private market ETFs, can you explain what that means and share your thoughts?
RICKY: The convergence of public and private markets has been a key theme in asset management and wealth advisory over the past few years, and it’s a big theme at Morningstar. We’re excited about that trend, but education is critical because there are risks retail investors may not have dealt with historically. Last year, for example, State Street and Apollo launched ETFs combining public and private credit markets. The democratization of private markets could be beneficial over the long run, but liquidity is a concern. We haven’t experienced a large credit event in quite some time, and questions remain about whether investors will be able to liquidate positions during periods of distress. Due diligence is essential with these products.
LINDSAY: We mentioned new covered call ETFs launched in 2025. Are they gaining traction?
RICKY: Yes. Derivative income ETFs have been popular, with JP Morgan leading the space for some time with its equity income products, JEPI in particular. Other competitors have launched similar products, and they’ve gathered assets. Investors need to understand the complexities and what they may give up on the upside. But demand for income remains strong, and these products serve that purpose.
LINDSAY: It can be overwhelming to choose from so many ETFs. You have a couple of picks. Let’s start with the Vanguard Core Bond ETF. Why do you like that one?
RICKY: It’s an active core bond ETF benchmarked against the U.S. Aggregate. It has about US$5 billion in assets and an expense ratio of 10 basis points. For an active ETF, that’s attractively priced. As multi-asset investors, we like to control our asset allocation exposures. Some active ETFs outsource too much decision-making. This strategy isn’t making big macro or duration calls. It aims to add value through security selection and moderate sector rotation — more singles and doubles than home runs. That fits well within a holistic portfolio.
LINDSAY: You also picked Franklin’s country suite, which offers ETFs for various countries. Explain the suite and then the specific ETF you favour.
RICKY: As asset allocators, we want control over regional exposures. Active equity ETFs can limit that control. We often find attractive opportunities in specific countries, but historically it was expensive to access them through ETFs. Franklin launched a lineup offering developed and emerging market exposure for as little as nine basis points. That allows cost-efficient, targeted allocations. One example is FLGB, the Franklin FTSE United Kingdom ETF. We see attractive valuations in the U.K. equity market, with many multinational companies. It provides cost-effective access to that exposure.
LINDSAY: Why target the U.K. specifically?
RICKY: Since Brexit, U.K. equities have traded at a discount, in our view. We see attractive long-term value and favourable sector composition offering appealing risk-reward. Compared with markets like the U.S. or Japan, which appear more expensive, the U.K. looks relatively attractive.
LINDSAY: That’s Ricky Williamson, head of investments and multi-asset strategies at Morningstar. Thanks for your time.
RICKY: Thank you.
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This BNN Bloomberg summary and transcript of the Feb. 12, 2026 interview with Ricky Williamson are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
