Investor Insights: Seven ways to mix active ETFs into your portfolio as investor appetite for the asset class soars

1) Fundamental / Discretionary Active ETFs

What they do: Traditional stock-picking. A portfolio manager selects securities based on research (valuation, earnings, macro views).

How they add value: Security selection (alpha vs benchmark), sector tilts, avoiding losers. This about active stock picking in an ETF wrapper—core equity with a chance to outperform.

Examples include the JPM Global Research Enhanced Index Equity UCITS ETF (JREG) and Fidelity Global Quality Income UCITS ETF (FGQI)

2) Enhanced Index / Quant Active ETFs

These track a benchmark loosely but tilt using quantitative signals (value, momentum, quality, low vol).They may look passive but the idea is to be quietly generating alpha. Examples include JPM US Research Enhanced Index Equity UCITS ETF (JREU) and the Goldman Sachs Alpha Enhanced World Equity Active UCITS ETF.

3) Income / Dividend Active ETFs

What they do: Actively select equities or bonds to maximise income yield + sustainability. How they add value: Dividend durability screening, yield enhancement and by avoiding dividend traps. These are usually preferred by clients seeking to generate a reliable income from their investments.

Examples include the JPM Global Equity Premium Income UCITS ETF (JEPG) and Fidelity US Quality Income UCITS ETF (FUSI).

4) Options-Based / Covered Call ETFs

What they do: Hold equities + sell options (usually calls) to generate income. How they add value: Option premium income, suppress volatility and offer partial downside cushion. The trade-off is that this caps upside in strong bull markets

Examples available on the Saxo platform include the Global X Nasdaq 100 Covered Call UCITS ETF and the YieldMax Big Tech Option Income UCITS ETF. Previously we have looked at some ETFs that use options strategies to offer up to 100% downside protection.

5) Thematic Active ETFs

These types of actively managed ETFs select stocks within a particular investing theme, such as AI, energy transition, defence, etc. These are particularly useful for investors to broaden exposure from a single stock exposure to a particular theme. Eg you might think defence stocks should do well and buy the biggest name in the space – this might work but exposes you to single stock risks (more on that here).

These ETFs may work well in early-stage structural trends, or when passive thematic indices get crowded. These are basically active stock picking inside big long-term trends.

Some of the most popular ETFs of this nature among clients include the ARK Innovation (ARCK), L&G Gold Mining (AUCP), VanEck Quantum Computing (QNTG), WisdomTree Uranium and Nuclear Energy (NCLR), and iShares MSCI Global Semiconductors (SEMI) UCITS ETFs.

6) Active Fixed Income ETFs

What they do: Actively manage bond portfolios (duration, credit, curve positioning).How they add value: Bond ETFs provide a straightforward way to access government debt without the complexities of buying individual bonds. You don’t need to manage maturities, coupons, or principal repayments, the ETF structure handles it for you.  While you can target ETFs with specific maturities to match your time horizon, the focus is usually more on yield and expected returns as the underlying bonds roll. For those managing their own Isa or Sipp, bond ETFs can be especially valuable as retirement approaches.

An example of this sort of security is the JPM Active Global Aggregate Bond UCITS ETF. It owns a mix of UK, US and other government (national and provincial) bonds across a range of maturities.

7) Multi-Asset Active ETFs

What they do: Blend equities, bonds, commodities, sometimes alternatives in one ETF. These can act as a one-stop-shop portfolio for investors and can be useful for those who would rather leave the major decision-making to the professionals. Examples such as the Vanguard LifeStrategy range (listed as mutual funds) offer a choice of equity allocation, usually somewhere between 60% and 100% in stocks with the remainder spread across various bonds and fixed income ETFs.