As the third quarter of 2025 draws to a close, the world of exchange-traded funds (ETFs) is abuzz with activity and innovation. According to data from ETF Database, more than 500 new ETFs have launched so far this year—a testament to the industry’s rapid evolution and investors’ hunger for fresh opportunities. But behind these numbers lies a deeper story about shifting priorities, the rise of active management, and the growing influence of technology in investment strategy.
This year, ETF launches have been nothing short of prolific. By September 23, 2025, over 500 new funds had entered the market, each hoping to carve out a niche in a crowded field. Yet, not all new ETFs are created equal. When filtered by year-to-date net inflows, just two standout products managed to attract more than $1 billion each, as reported by ETF Database. Leading the pack is the Microsectors FANG+ 3 Leveraged ETNs (FNGU), a fund offering triple-leveraged exposure to the so-called FANG stocks—Facebook, Amazon, Netflix, Google, and their close tech cousins. FNGU pulled in a staggering $1.01 billion in net inflows, underscoring investors’ continued fascination with high-octane tech plays.
Rounding out the top five ETFs by flows are a mix of active and passive funds: the active Tema S&P 500 Historical Weight ETF Strategy ETF (DSPY), the passive iShares MSCI World Small-Cap ETF (WSML), Capital Group U.S. Small and Mid Cap ETF (CGMM), and VistaShares Target 15 Berkshire Select Income ETF (OMAH), which gathered $528 million in inflows. While these numbers are impressive, they pale in comparison to last year’s crypto-fueled frenzy. In 2024, the iShares Bitcoin Trust ETF (IBIT) dominated the scene, reflecting the outsized impact of digital assets on the ETF landscape.
Asset size tells a slightly different story. Among the top new ETFs by assets under management (AUM) in 2025, only FNGU makes both the flows and AUM lists, boasting $2.4 billion. Other heavy hitters include the iShares Dynamic Equity Active ETF (BDYN) with $2.1 billion, the iShares High Yield Muni Active ETF (HIMU)—launched in June—at $2 billion, and the iShares Disciplined Volatility Equity Active ETF Trust Unit (BDVL) with $1.2 billion in AUM. Each of these funds has quickly established itself as a player to watch, but what unites them is even more telling.
Perhaps the most striking trend of 2025 is the dominance of active management. According to ETF Database, nearly four out of every five new launches this year are active ETFs—389 active funds versus 119 passive ones. This surge is not just a statistical blip; it’s a reflection of deeper changes in investor behavior and industry structure. In fact, active ETFs have a strong showing in the top five lists by both flows and AUM. Funds like HIMU, BDVL, JPHY, and DSPY all fall squarely into the active category, highlighting a clear shift away from the traditional, rules-based indexing that defined the ETF market for decades.
What’s driving this active ETF boom? Part of the answer lies in the ongoing conversion of mutual funds into ETFs—a trend that’s accelerated as investors seek greater tax efficiency, lower fees, and more flexible trading. But there’s also a growing recognition that passive strategies, while efficient, sometimes fail to address concentration risk or adapt to rapidly changing markets. As noted in Advisor Perspectives, DSPY, for example, offers an alternative view of the S&P 500, specifically designed to tackle the risks posed by a handful of giant stocks dominating the index. Meanwhile, BDVL aims for "solid risk-adjusted returns" by actively managing a mix of fixed income, derivatives, and global equities.
Another key development in 2025 is the renewed interest in small-cap equities and adaptive fixed income strategies. Investors, perhaps anticipating rate cuts or seeking value in overlooked corners of the market, have poured money into funds focused on small caps. At the same time, there’s been robust demand for high yield and more flexible, nimble approaches to fixed income. The rationale is clear: in a world of uncertain rates and shifting economic tides, adaptability is king. The strongest ETFs by flows and AUM this year are those that promise not just growth, but durability—funds built to weather storms and seize opportunities wherever they arise.
This shift toward more sophisticated, active management is happening alongside another revolution: the integration of cutting-edge technology into investment processes. On September 24, 2025, The Institutional Edge podcast featured Antonio Rodriguez, Director of Investments at Building Service 32BJ Benefit Funds, discussing the transformative potential of multi-agent artificial intelligence (AI) systems for pension fund operations and investments. Rodriguez and host Angelo Calvello explored how these AI-driven platforms could automate complex decision-making, enhance risk management, and even identify new sources of alpha in real time.
"Active ETF growth stems from mutual fund conversions and increasing demand," Rodriguez remarked during the conversation, highlighting how investor appetite for flexibility and innovation is reshaping the industry. The episode delved into the momentum active ETFs have gained, noting that technology—especially AI—may soon supercharge this trend by enabling managers to process vast amounts of data and respond to market shifts faster than ever before.
The convergence of these forces—active management, technological innovation, and changing investor preferences—has created a dynamic, competitive ETF market in 2025. Gone are the days when simple, low-cost index funds ruled the roost. Today’s investors are looking for strategies that can adapt, protect, and outperform. Whether it’s the leveraged thrill of FNGU, the risk-adjusted discipline of BDVL, or the AI-powered promise of future pension fund solutions, the message is clear: the ETF world is not just growing, it’s evolving.
Of course, with so many new products hitting the shelves, investors need to do their homework. Not every new ETF will stand the test of time, and the rush to innovation sometimes brings complexity that can trip up the unwary. But for those willing to dig deeper, 2025’s ETF launches offer a window into the future of investing—a future where active managers, empowered by technology, are writing the next chapter of financial markets.
As the year winds down, all eyes will be on which of these new funds can deliver on their promises. The stakes are high, the competition fierce, and the pace of change relentless. But one thing’s for certain: the ETF revolution shows no signs of slowing, and the smartest investors are already looking ahead to what comes next.
