Active ETFs Outperform Indexes As Flexibility Drives Gains

Active exchange-traded funds (ETFs) have been making waves in global markets so far in 2026, carving out a distinct path from their passive counterparts and drawing attention from both institutional and retail investors. While the ETF landscape has evolved rapidly since the introduction of the ETF rule in 2019, the current year has seen active ETFs not only proliferate but, in many cases, outperform traditional passive funds—thanks to their flexibility and strategic management.

According to recent findings published on January 24, 2026, the Pimco Municipal Income Opportunities Active Exchange-traded Fund (NASDAQ: MINO) has entered a phase marked by full alignment in neutral sentiment, making it a classic case for a wait-and-see approach. The fund currently exhibits a mid-channel oscillation pattern, with a 5.4:1 risk-reward setup targeting a modest 1.5% gain versus a 0.3% risk. Key price signals—44.46, 45.21, 45.55, and 45.91—show 45.21 as the current price, and neutral sentiment prevails across all time horizons, supporting sideways action. Multi-timeframe analysis further underscores this neutrality, with support and resistance levels set for near-term, mid-term, and long-term periods, suggesting that investors are best served by patience and careful observation at this juncture.

But MINO is just one example in a much broader, more dynamic story. Since the ETF rule’s arrival, active ETF strategies have flourished, with their popularity underpinned by advantages such as tax efficiency, tradability, and, crucially, the ability for managers to deviate from rigid index tracking. As reported by ETF Database, active ETFs have grown exponentially, particularly by blending the flexibility of active management with the inherent benefits of the ETF structure.

American Century Investments stands out as a key player in this space, offering a suite of active equity and fixed income ETFs. The Avantis U.S. Small Cap Value ETF (AVUV) is a prime example: it charges a competitive 0.25% fee and employs a systematic approach to invest in small-cap firms that meet strict value criteria. Over the past twelve months, AVUV has added more than $5.5 billion in assets under management (AUM), pushing its total AUM beyond the $20 billion mark. The fund has posted a 12.1% return over the last three months, a testament to the potential of combining active flexibility with disciplined value investing.

Building on this momentum, American Century Investments launched two new ETFs in October 2025: the American Century Small Cap Value Insights ETF (ACSV) and the American Century Small Cap Growth Insights ETF (ACSG). Each charges a 0.49% fee and relies on bottom-up portfolio construction rooted in fundamental research. These funds target small-cap firms with a focus on either value or growth, dynamically adjusting holdings as valuation targets are reached or more attractive opportunities emerge. This approach allows for deep active investing focus, while the ETF wrapper ensures easy tradability and cost efficiency. Together, these funds exemplify how active ETFs are evolving to meet a wide range of risk tolerances and portfolio objectives.

The impact of active ETFs isn’t limited to the U.S. market. According to Koscom’s ETF Check, Timefolio Asset Management’s TIME Kospi Active ETF, which tracks South Korea’s Kospi index, has delivered a year-to-date return of 20.78%—outpacing the Kospi’s approximately 13% gain by more than seven percentage points. This outperformance was achieved by strategically increasing the weight of Hyundai to 6.14%, more than double its representation in the Kospi index (less than 3%). Major holdings also include SK Hynix (21.74%) and Samsung Electronics (18.41%). Kim Nam-ho, head of the ETF management division at Timefolio Asset Management, explained, “We increased Hyundai’s weight early this year, anticipating its re-rating potential. The strategy of boosting exposure to Hyundai and related value-chain companies such as HL Mando and Hyundai AutoEver contributed to the strong performance.”

Active ETFs’ ability to outperform is also evident in the U.S. market. Asset Plus Asset Management’s Global Blacksmith Active ETF, for example, ranked first among domestically listed S&P 500 ETFs with a 6.91% year-to-date return. This stands in stark contrast to most passive ETFs linked to the S&P 500, which have hovered around a 0% return, despite the index’s modest 0.25% gain since the beginning of the year. Similarly, the TIMEO U.S. Nasdaq 100 Active ETF achieved a 9.26% year-to-date return, the highest among ETFs tracking the same index.

Experts attribute this edge to the flexibility inherent in active ETFs. Ko Tae-hoon, head of the ETF division at Asset Plus Asset Management, stated, “Active ETFs offer high flexibility as managers can adjust stock weights based on their assessments of corporate value. In markets with ambiguous liquidity or significant performance gaps between stocks, active selection can drive outperformance.” Kim Nam-ho further noted, “The ability to rebalance daily is another advantage of active ETFs. In a strongly rising market, identifying top-performing stocks daily and concentrating bets can lead to outperformance. Conversely, in a declining market like the recent U.S. equity slump, reducing exposure to constrained sectors like big tech and increasing holdings in relatively defensive or rebound-capable stocks helps manage volatility.”

However, this flexibility is a double-edged sword. As Kim cautioned, “As active ETF performance can vary significantly based on managers’ judgments, investors should thoroughly review the investment strategy and management philosophy before investing.” The message is clear: while active ETFs offer the potential for outperformance, especially in markets where the gap between winners and losers is widening, due diligence is essential.

Institutional trading strategies are also leveraging AI-driven models to tailor approaches for different risk profiles and holding periods. For example, the AI models applied to MINO incorporate sophisticated risk management parameters designed to optimize position sizing and minimize drawdown risk. The multi-timeframe signal analysis for MINO—spanning near-term (1-5 days), mid-term (5-20 days), and long-term (20+ days)—all point to neutral signal strength, reinforcing the current consensus for a sideways or wait-and-see approach. Support and resistance levels are clearly defined at $45.49 and $0.00 (near-term), $45.60 and $65.13 (mid-term), and $45.21 and $45.91 (long-term), providing clear risk parameters for investors to consider.

Ultimately, the rise of active ETFs marks a significant evolution in how investors approach portfolio construction and risk management. The blend of active oversight and the structural benefits of ETFs—liquidity, transparency, and efficiency—offers a compelling proposition, particularly in volatile or uneven markets. As the ETF universe continues to expand, the challenge for investors will be to select funds with robust strategies and proven management, ensuring that the flexibility of active ETFs translates into tangible, long-term value.