The most recent updates to the long-running S&P Indices Vs Active (SPIVA) scorecard continue to paint a sobering picture for active fund managers. In the past decade, 84.3% of large-cap mutual funds underperformed the S&P 500.
But the active exchange-traded funds (ETFs) category continues to grow rapidly in both product count and inflows. As of May 29, the ETF Central screening tool showed that out of roughly 5,265 U.S.-listed ETFs, about half (2,650) now classified as active.
This growth is driven by strong demand from advisors and institutions, ongoing conversions of mutual funds and separately managed accounts (SMAs) into ETFs, as well as a growing number of active ETFs with fee structures increasingly competitive with passive counterparts.
That said, actively managed portfolios are still harder to analyze at a glance. Unlike index-tracking funds, which publish detailed methodologies and holdings tied to transparent benchmarks, active ETFs might rely on proprietary strategies that aren't always easy to unpack.
How do you decide which active ETFs are worth it? Here's how to start your analysis, with a few standout funds to consider.
The ins and outs of active ETFs
An active ETF is one in which the portfolio manager isn't trying to replicate a transparent, rules-based index, as would a manager of an S&P 500 ETF. Instead, they're building and managing the portfolio using their own proprietary process, which might be driven by a quantitative model, a qualitative strategy or a mix of both.
If you go the active route, the S&P 500 might still be your benchmark for measuring performance, but it's not your playbook. Instead of following the index's rules, you're selecting stocks based on your own methodology and making buy-and-sell decisions accordingly.
It's helpful to think of active management as a style that can be applied across all asset classes, including bond, commodities and options, not just equities and stock-picking.
How we chose the best active ETFs to buy
We focused on Morningstar five-star rated ETFs, which represent the top 10% of funds in their peer group based on risk-adjusted performance. That last part is crucial for active strategies, where higher returns might mask excessive volatility or risk-taking.
To further narrow the field, we set a strict expense ratio cap of 0.50%. While active ETFs often cost more than index funds, fees still eat into long-term returns and work against the rule of compounding over time. By limiting expenses, we aimed to identify funds that deliver strong performance without overcharging for it.
Finally, we focused on product viability. While some ETF analysts use $50 million in assets as a minimum threshold for long-term survival, we raised the bar to $1 billion in assets under management (AUM). This standard helps ensure that the strategies we highlight have real traction with investors.
JPMorgan Nasdaq Equity Premium ETF
- Assets under management : $39.6 billion
- 30-day SEC yield: 12.7%
- 3-year annualized return: 21.0%
- Expenses: 0.35%, or $35 annually for every $10,000 invested
The JPMorgan Nasdaq Equity Premium ETF (JEPQ) is one of JPMorgan Asset Management's most widely held active ETFs, combining modest fees with a distinctive strategy deployed by Hamilton Reiner.
The fund selects stocks from the Nasdaq-100 with a slight defensive tilt, then allocates roughly 15% of the portfolio to equity-linked notes. These notes replicate the return profile of a one-month, out-of-the-money covered call on the Nasdaq-100.
This caps upside potential, but it allows the ETF to generate significant premium income from options, capitalizing on the index's historically elevated volatility. While the income is largely taxed as ordinary income, the yield is among the highest in the category.
The combination of active equity selection and a structured options overlay earned JEPQ a five-star Morningstar rating within the derivative income peer group.
Learn more about JEPQ at the JPMorgan provider site.
Capital Group Growth ETF
- Assets under management: $24.3 billion
- 30-day SEC yield: 0.2%
- 3-year annualized return: 27.0%
- Expense ratio: 0.39%
Among Capital Group's recent offerings, Capital Group Growth ETF (CGGR) has quickly gained traction thanks to standout performance and a reasonable fee structure.
Capital Group is one of the largest active managers globally, with a long history spanning mutual funds, separately managed accounts and now a growing presence in ETFs.
CGGR follows Capital Group's "Capital System" of management, in which a team of seven portfolio managers independently runs segments of the fund based on their highest-conviction ideas.
This structure promotes diversification across management styles and mitigates risks such as style drift or manager turnover often associated with single-lead active funds.
While CGGR doesn't disclose its growth screens, it maintains a relatively concentrated portfolio of approximately 100 holdings and can allocate up to 25% to international equities.
Its low distribution yield supports tax efficiency, while the 0.39% expense ratio remains competitive within the active equity space.
Learn more about CGGR at the Capital Group provider site.
Capital Group Dividend Value ETF
- Assets under management: $35.1 billion
- 30-day SEC yield: 1.3%
- 3-year annualized return: 25.7%
- Expenses: 0.33%
Unlike rules-based dividend strategies, the Capital Group Dividend Value ETF (CGDV) management team's active approach enables the portfolio team to target companies that might not meet traditional screens for dividend yield or dividend growth but still offer attractive income potential.
The fund's objective is broadly framed as seeking consistent income that exceeds the average yield of the S&P 500, with an emphasis on companies that currently pay or have the potential to initiate dividend payments.
This means the ETF won't miss out on otherwise low-yielding tech stocks that have nonetheless delivered strong dividend growth and fundamentals.
As with other Capital Group ETFs, CGDV employs a concentrated approach, with just 52 holdings. It also allows up to 10% in non-U.S. stocks.
While the specific selection process isn't disclosed, the portfolio skews toward large-cap stocks. There's exposure across all 11 GICS sectors, with a notable tilt toward technology and industrial stocks.
Learn more about CGDV at the Capital Group provider site.
Avantis International Equity ETF
- Assets under management: $8.7 billion
- 30-day SEC yield: 2.6%
- 3-year annualized return: 18.0%
- Expenses: 0.23%
International investing doesn't have to rely on traditional passive indexing based on market cap. The Avantis International Equity ETF (AVDE) is a strong example of what's possible with a different approach.
The fund is one of many from Avantis Investors that applies a quantitative, factor-based methodology, tilting toward smaller and undervalued but profitable companies within its investable universe.
AVDE is benchmarked to the MSCI World ex USA IMI Index and has consistently outperformed it over the trailing one-, three- and five-year periods, as well as year to date in 2026.
That performance reflects both Avantis' disciplined methodology and the fund's low expense ratio, which helps reduce long-term drag. The firm offers similar strategies for other market segments.
Learn more about AVDE at the Avantis provider site.
Principal U.S. Mega-Cap ETF
- Assets under management: $3.4 billion
- 30-day SEC yield: 0.8%
- 3-year annualized return: 22.7%
- Expenses: 0.12%
The Principal U.S. Mega-Cap ETF (USMC) is one of the most cost-effective options for gaining large-cap core equity exposure with an active strategy. It even charges less than some passive index-tracking ETFs.
The fund uses a rules-based, proprietary approach that results in a concentrated portfolio of just 26 stocks, with a 50.3% active share.
USMC's methodology begins by screening the top 50% of S&P 500 companies by market cap. From there, the largest 10% are weighted by market capitalization, while the remaining 40% are weighted using Principal's internal financial strength score.
The result has been strong relative performance, with the ETF outperforming the S&P 500 over the trailing one-, three- and five-year periods.
Learn more about USMC at the Principal provider site.
