Actively managed funds vs. ETFs – How hybrid strategies and AI are rearranging the asset management hierarchy

Why it matters now

The decision Actively managed funds vs. ETF has evolved from a pure product choice to a fundamental strategic decision for the profitability of financial institutions. While robo-advisors (RAs) have scaled this conflict through cost-effective passive solutions, we are currently experiencing a convergence: The massive rise of active ETFs combines the flexibility of management with the efficiency of the ETF structure.

The central question: Where is the limit of scalability?

The radical cost leadership of digital portfolio solutions—often with a total expense ratio of 0.5% to 0.85% p.a.—puts massive pressure on active strategies. The mathematical hurdle is enormous: According to current SPIVA data, over the long term, 90% of active managers fail to beat their benchmark index after costs.

For board members and partners, the existential question therefore arises: In which segments does the intellectual performance of management still justify a significant premium, and where is capitulation to the algorithm the more economically sensible choice?

Evidence: The redefinition of the value chain

Current market observations show three decisive shifts in the industry:

• The triumph of active ETFs: Active ETFs are the fastest growing product category in the European market. They offer active stock picking at fees of often only 0.3% to 0.5%, which deprives classic mutual funds (1.5% – 2.5% TER) of their raison d’être in the retail sector.
• AI as a differentiation turbo: Leading asset managers today use AI-supported analyses to process information faster than purely passive indices. This creates a new form of “technology alpha” that is becoming a central marketing argument for banks.
• The HNWI resilience: Despite technical advances, the segment of High-Net-Worth Individuals (HNWI) remains a bastion of active management. Complex asset structures (foundations, private equity, succession planning) require contextual intelligence that standardized robo-models cannot currently map.

Actively Managed Funds vs. ETFs: Practical Implications & Steps

Executives must now segment the product portfolio uncompromisingly along the value chain:

1. Standardization in Retail (Active Core): Use active ETFs or automated robo-solutions as the basis for the mass business. This stabilizes margins through lower administrative costs while maintaining a modern image.
2. Focus on the “Behavioral Coach”: The true added value of the advisor shifts away from stock selection towards behavioral control. In volatile market phases, the human secures the return by protecting customers from procyclical panic sales – a factor that a pure algorithm often even reinforces.
3. Investment in Hyper-Personalization: Use AI tools to incorporate individual customer needs (e.g. ESG preferences or tax optimization) into portfolio construction in real time. This transforms the passive ETF raw material into a customized active service.

Conclusion & Outlook

The conflict Actively managed funds vs. ETF does not end with the victory of one side, but in a technological symbiosis. The passive ETF structure has irreversibly lowered the cost threshold, while active strategies are gaining efficiency through AI and new vehicles such as active ETFs. Strategically, this means for you: Scaling through technology, trust through empathy. Whoever maintains this balance will shape the wealth management of the coming decade.