This year could mark a milestone transformation for the ETF market. According to reports, JPMorgan Chase's global CEO, George Gatch, recently stated that the company is actively seeking approval from the China Securities Regulatory Commission and expects to obtain permission to launch actively managed ETF business within the year.
Market rumors suggest that the first batch of pilot programs may involve six fund companies. From a regulatory perspective, developing passive investment has been a policy priority in recent years. Regulators have repeatedly emphasized the need to vigorously promote index-based investing, hoping to guide long-term capital into the market through tools like ETFs, optimize the investor structure, and enhance market stability.
Amid these policy tailwinds, ETFs, as representative instruments of passive investment, have experienced explosive growth in scale in recent years, becoming the most important growth driver in the public fund industry. However, as market efficiency improves and investor demands diversify, purely passive index products are gradually revealing limitations: they can only provide beta returns based on benchmark indices and cannot deliver alpha to investors during volatile or structural market conditions.
The market urgently needs actively managed ETFs that retain the advantages of high liquidity and transparency while introducing flexible stock selection capabilities, thereby filling the product gap between purely passive ETFs and traditional active funds. If such products are successfully approved, it would signify the Chinese ETF market's official transition from the "era of passive tools" to the "era of active management toolization."
The launch of active ETFs meets an emerging trend. By the end of April, the total scale of domestic ETFs had exceeded 5 trillion yuan, with equity ETFs accounting for over 50% of the market, making them the dominant force. Passive ETFs mainly include broad-based ETFs and sector/thematic ETFs, both of which focus on passively tracking indices and serve as highly concentrated, highly liquid market investment tools.
With increasing demand for alpha and the gradual evolution of passive strategies, enhanced index ETFs have emerged. Currently, there are 55 enhanced ETF products in the market. These allow fund managers to make slight deviations from the index to pursue outperformance. However, enhanced index ETFs still face significant limitations. Regulatory requirements stipulate that such products must invest at least 80% of their non-cash assets in the constituent stocks of the target index or its alternatives, with a daily tracking deviation absolute value not exceeding 0.35% and an annualized tracking error not exceeding 6.5%. This leaves fund managers with very limited active management space, making them inherently constrained.
The introduction of actively managed ETFs will completely break these constraints. Unlike enhanced index ETFs, active ETFs do not preset a tracking index. Fund managers can freely select stocks and adjust portfolios based on investment research, similar to managing ordinary active funds. In terms of product structure, active ETFs perfectly combine the advantages of two traditional products: they leverage the investment capabilities of active fund managers to achieve excess returns through stock selection and asset allocation, while retaining ETF benefits such as low cost, high liquidity, real-time valuation, and trading convenience.
This integration is not merely additive but represents an institutional innovation. JPMorgan Chase recently launched its first active ETF in Taiwan in March 2026 and is now planning to enter the mainland market. Active ETF strategies have already been thoroughly validated in overseas markets. With approximately $257 billion in assets under management, JPMorgan has surpassed Dimensional Fund Advisors to become the world's largest provider of active ETFs, with active ETFs becoming a core engine for its global growth.
In the future, the domestic market may localize and apply proven successful models such as yield enhancement and dynamic rotation strategies to active ETFs. The timing of the active ETF launch is not accidental but driven by both policy direction and market demand. Regulatory authorities may promote innovative products through batch approvals, aligning with the capital market's consistent approach of "pilot first, gradual promotion." Not only active ETFs but also ETFs for the Beijing Stock Exchange and fixed-income-plus ETFs will become key components of the future diversified development of the ETF market, leading to a more varied ecosystem.
From a market demand perspective, the target audience for active ETFs is clear. One group consists of investors skilled in trading and seeking excess returns, who are dissatisfied with purely sector or index ETFs and are willing to pay for fund managers' stock-picking abilities. The other group includes investors who favor certain fund managers but prefer not to purchase traditional active funds outright; active ETFs offer a more flexible and transparent participation method.
More importantly, active ETFs address several pain points of traditional active public funds. Firstly, they solve the issue of real-time valuation: traditional active funds only disclose net asset value after market close, while active ETFs allow real-time trading and valuation intraday. Secondly, they enhance transparency: traditional active funds disclose holdings only quarterly, leaving reporting gaps, whereas active ETFs publish creation/redemption lists daily or periodically, enabling investors to track fund managers' actions more promptly.
Drawing on the experience of mature overseas markets, the feasibility of active ETFs has been fully validated; their domestic launch is only a matter of time. The introduction of active ETFs may trigger profound changes in the public fund industry's competitive landscape. The most direct impact will come from fees. Based on overseas experience, management fees for active ETFs are typically lower than those of traditional active funds but higher than passive ETFs. Investors can directly compare the fees and performance of different products in the secondary market, ensuring high transparency.
Moreover, as performance transparency increases, traditional active funds will face unprecedented pressure. The higher transparency of active ETF holdings will compel fund managers to enhance their genuine alpha-generating capabilities. From a product innovation standpoint, active ETFs may also spur more segmented strategies, such as those targeting specific sector rotations, thematic investments, or quantitative stock selection, catering to investors with varying risk preferences.
The year 2026 may mark the inaugural year for active ETFs in China. Regardless of when the first products are launched or which institutions issue them, the direction of this innovation is clear. For investors, it means the birth of a new investment tool; for the public fund industry, it heralds a triple revolution in fees, transparency, and performance.