Summary of Key Points
The first batch of 18 active ETFs is about to be submitted for registration, with 9 each on the Shanghai and Shenzhen stock exchanges. Eighteen well-known fund companies (including both domestic and foreign, as well as large and medium-sized institutions) are participating in this pilot program. Active ETFs represent a new type of fund that combines the features of active stock selection with the trading flexibility of ETFs. They were officially supported for launch in June this year and come with strict requirements for both the fund companies and the products themselves. These funds not only meet investors' needs for transparent and flexible investment tools but also promote healthy competition within the industry. Active ETFs are experiencing rapid growth globally, and now is the right time for their introduction in China.
What Are Active ETFs, and How Do They Differ from Ordinary Funds?
In simple terms, active ETFs combine the characteristics of both active management (where a fund manager makes stock selections) and the trading convenience of ETFs:
- Like active funds: The manager actively selects stocks rather than simply following an index (for example, while passive ETFs replicate an index like the CSI 300 and buy the constituent stocks, active ETFs choose the stocks the manager believes are the best).
- Like ETFs: They can be traded in real-time on the stock exchange (just like buying stocks, with prices changing throughout the day), and investors can see the exact portfolio composition daily (for example, which stocks were bought today and their respective weights). In contrast, portfolios of offline active funds are typically only disclosed weekly or monthly.
Compared to ordinary offline active funds, which have a single closing price per day, transactions require waiting for the net asset value to be calculated after the market closes, and funds are available 1-2 days after the sale. Active ETFs, on the other hand, allow for real-time trading with immediate fund availability after a sale, and investors can also see daily updates on their portfolio.
Who Is Issuing the First Batch of Active ETFs, and How Many Are There?
- Total number: 18 ETFs, with 9 on the Shanghai Stock Exchange and 9 on the Shenzhen Stock Exchange.
- Managers: These are all experienced players in the industry, including domestic companies like E Fund, Huaxia Fund, and Morgan Fund (foreign investors), as well as foreign firms such as Southern Fund, Fullgoal Fund, and Tianhong Fund (the parent company of Yu’ebao). The list covers a wide range of investors and institutional types.
Requirements for Fund Companies and Products to Issue Active ETFs
Not just any fund company can issue active ETFs; the authorities have set strict criteria:
Requirements for Fund Companies:
- No major violations or legal issues in the past three years.
- At least five years of experience managing active equity funds (such as stock funds), with an average management scale of no less than 10 billion yuan in the past three years.
- A strong research and development team and a stable infrastructure capable of supporting the real-time operations of ETFs.
Requirements for the Products Themselves:
- Diversified investment: The portfolio must include at least 30 stocks, with the top 10 largest holdings accounting for no more than 60% to reduce risk.
- Active stocks: The selected stocks should have high daily trading volumes (in the top 80%) to ensure they are easily traded.
- Low turnover: Frequent portfolio adjustments (such as buying and selling on the same day) should be avoided to prevent significant market disruptions.
What Are the Benefits of Active ETFs for Investors?
1. Transparency: Investors can see their portfolio composition daily, knowing exactly which stocks their money has been invested in, unlike with offline funds.
2. Flexibility: Real-time trading on the exchange allows for immediate sales if the market declines.
3. Quick fund availability: Funds are available immediately after a sale, whereas with offline funds, the process takes 1-2 days.
4. Increased choices: Previously, only passive ETFs were available on the exchange; now, active ETFs provide investors with more options, especially those who want the manager to select stocks while still enjoying flexible trading.
Why Are Active ETFs Being Introduced Now?
- Global trend: Active ETFs are one of the fastest-growing types of funds. As of March 2026, the global market for active ETFs amounted to $2.1 trillion, with annual growth of 44% over the past decade (more than twice the overall ETF growth rate of 19%).
- Ready time in China: The domestic ETF market has matured, with improved management capabilities among fund companies and more sophisticated investors. Introducing active ETFs:
- For investors: It meets the demand for flexible trading combined with active stock selection.
- For the industry: It encourages fund companies to enhance their research capabilities (since portfolio transparency exposes poor performance), promoting healthy competition.
- For the market: It provides more investment options for long-term funds such as pension and insurance money, contributing to market stability.
In summary, active ETFs represent a more transparent and flexible alternative to traditional active funds. The first batch of pilot products is strong, with strict requirements in place, which is beneficial for both individual investors and the market. If you want the manager to help select stocks while enjoying flexible trading options, active ETFs could be a good choice.