Advantages and disadvantages of active ETFs (roundtable ‘New Developments in ETFs’ part 3)

February 2, 2026

_{This report was originally written in Dutch. This is an English translation.}

In part 3 of the roundtable ‘New Developments in ETFs’, participants discuss whether transparency threatens alpha potential. They weigh up the pros and cons of active ETFs against traditional funds and discuss costs, liquidity, tax aspects and the role of active ETFs within a diversified portfolio.

By Hans Amesz

This is part 3 of the report. You can read part 1 here, part 2 here, and part 4 here.

Is the alpha of the active strategy at risk in the more transparent ETF structure?

Sguazzini: ‘That was the main question when we considered launching these strategies seven years ago. With regard to active ETFs, we have received positive feedback from our clients, namely that active ETFs should offer the same advantages that have made ETFs such a successful instrument. Every time we launch a new product, we look at three fundamental aspects: liquidity, transparency and capacity. The idea of publishing daily positions felt a little uncomfortable at first, but we believe that transparency is very important to our clients.’

Hutcheson: ‘Transparency is a valuable feature of both index and active ETFs, and it is positive that some progress is being made in this area. I think we will see more semi-transparent ETFs in Europe, because there is a lot of potential for them there.’

Brouwer: ‘The magic lies in how a portfolio is constructed, not just which stocks and which structure are chosen. I believe it all comes down to the question of why an ETF is active.’

Paul Linssen: ‘That's possible. An ETF structure is less attractive for less liquid assets. Daily transparency provides immediate insight into the positioning, even if that is not what you want. For example, when you, as an equity manager, are building up or reducing a less liquid position. If, as a result, the manager no longer includes more or fewer of these types of shares in the portfolio, this can have an impact on the alpha potential.’

What are the main advantages and disadvantages of using an active ETF compared to a traditional active investment fund, particularly for European investors?

Bialkowski: ‘The costs of an active ETF are generally lower than those of an active investment fund. But it is important to compare apples with apples. Many active ETFs focus on enhanced index strategies and are therefore not fully active. In that case, it makes sense that the costs are lower than for active funds. Transparency can also be an advantage, although this is not always important for retail investors. There are also disadvantages. For example, tax efficiency in Europe is more limited than in the US, and many active ETFs still have a limited track record.’

Kevric: ‘A survey of our institutional and wholesale clients showed that 58% focus on costs, 27% buy for sustainability, and 23% for liquidity. So it’s a combination of factors, but ultimately costs and alpha generation are the most important.’

Brouwer: ‘With active ETFs, you have to be more careful than with traditional ETFs. You always have to check whether it fits into your portfolio. There are advantages: liquidity, cost transparency, but there are also disadvantages, namely that you have to pay close attention to whether the ETF is still doing what it should do within the defined framework, because you cannot assume that the active ETF, like a traditional passive ETF, will do what the benchmark does.’

Linssen: ‘I think that active ETFs will become the standard structure for most active funds, with exceptions for less liquid strategies, for example. In addition to advantages such as transparency and lower costs, the stock market listing also makes it easier to incorporate active strategies via digital platforms alongside the familiar passive ETFs.’

What else should investors know about active ETFs and why should they include them in their portfolios?

Kevric: ‘It is important to have a good structure for your ETF activities and to work with a large number of Authorised Participants, or APs. At the moment, there are many new players; everyone wants to offer active ETFs, but as I said, a good structure is crucial for this.’

Hutcheson: ‘The number of active ETFs being launched is very large. It's not just a matter of plug and play; you really need to understand the dynamics, the secondary markets and the infrastructure involved.’

Brouwer: ‘There are many different aspects of an active ETF that need to be managed. An investor with an active ETF in their portfolio should not think: okay, now I'm done. Keep an eye on the ETF, because there are many additional layers of checks and balances that need to be added.’

Bialkowski: ‘Even though the structure – such as an active ETF structure – is important, it remains essential that the investment strategy is appropriate. For example, an active ETF can fulfil a satellite function around a core of passive strategies. This creates more diversification in the portfolio. In addition, active ETFs can be used effectively for tactical adjustments to the portfolio.’

Linssen: ‘Investors will always need to have a good understanding of what they are investing in. This also applies to active ETFs. Ultimately, it is about understanding the underlying strategy and the exposure you gain from it. Whether this is achieved through a traditional fund or an ETF structure is of secondary importance.’