Are Active ETFs Saving Fund Families or Cannibalizing Them?

Are the active equity exchange-traded funds that traditional mutual fund families have been launching to keep investors from leaving for other firms’ ETFs forestalling or hastening the demise of their old-school offerings? The answer isn’t necessarily clear.

Investors have been, on average, selling actively managed stock mutual funds and buying passive options, especially ETFs, for several years. For a more apples-to-apples comparison, we compared actively managed US equity funds in the nine Morningstar Style Box categories (excluding managers DFA and Avantis, which are more akin to passive strategies than active ones) and took only the mutual funds that had an ETF in the same Morningstar Category offered by the same parent company. It’s clear that investors have been more open to actively managed US equity ETFs; in aggregate, they’ve attracted inflows as traditional stock mutual funds have continued to bleed outflows.

The trend begs the question: Are fund companies essentially robbing Peter to pay Paul? Are their newer active equity ETFs garnering inflows at the expense of their traditional stock mutual funds?

To answer these questions, we looked at the roughly 160 actively managed US equity ETFs that are offered by firms that also offer mutual funds in the nine main style box categories (excluding systematic managers Avantis and DFA). To be considered a clone, a mutual fund had to be at least 90% similar to an ETF offered by the same asset manager in the same category, according to Morningstar’s similarity score (which measures overlap between two portfolios). That left about 30 mutual funds with active ETF clones.

On average, the mutual funds with ETF clones have seen steeper outflows since launching their doppelgangers, but the ETFs’ success has varied wildly. For instance, T. Rowe Price Blue Chip Growth ETF TCHP took in more than $1.1 billion from its August 2020 launch through September 2025, while its mutual fund copy T. Rowe Price Blue Chip Growth TRBCX shed $53 billion.

Meanwhile, since boutique asset manager Jensen Investment Management launched Jensen Quality Growth ETF JGRW in August 2024, it took in just $71 million through September 2025, while the 33-year-old Jensen Quality Growth JENSX had $3.7 billion in outflows. Almost all the ETF inflows have been new money rather than transfers from the mutual fund, the firm says.

Still, many factors can affect flows, which makes drawing definitive conclusions tricky. For instance, flows data doesn’t show where investors’ money goes when they withdraw money from a fund, so we are assuming at least some of the mutual funds’ outflows are going to their duplicate ETFs. Similarly, if the active ETF clone of the mutual fund didn’t exist, it’s unknown if investors would put their money into the traditional stock mutual fund or if they’d invest elsewhere.

While the data can’t tell the whole story, it’s clear that equity ETFs are still a long way from making up for the years of outflows traditional stock mutual funds have suffered.

The Cousin Problem

Fund families have created other competitors to their traditional equity lineups. Many, for instance, have launched ETFs that are not carbon copies of existing mutual funds but share the same general approaches and even portfolio managers. Such strategies—call them cousins rather than clones—have considerable overlap with existing mutual funds but remain different enough to be their own stand-alone strategies. For this analysis, we define cousins as ETFs that overlap by more than 70% but less than 90% with existing mutual funds from the same asset manager in the same category.

We identified 40 actively managed US equity ETFs that were cousins of mutual funds. Among the managers to launch a cousin version of an active ETF was T. Rowe Price, which launched T. Rowe Price Growth ETF TGRT, which is a cousin of T. Rowe Price Large Cap Growth TRLGX. The firm is among the many that have cited not wanting to give fiduciaries, such as many financial advisors and retirement plan sponsors, more reasons to leave legacy mutual funds. Fiduciaries are required to act in their clients’ best interest, which often means choosing the lowest-cost option. By launching cousins rather than clones, this helps fiduciaries avoid this conflict.

Of the group, J.P. Morgan had the most cousin ETFs with three, followed by a handful of firms that had two cousin ETFs, including MFS, Alger, Capital Group, Federated Hermes, and Putnam.

Taking the Edge Off

So, it’s still an open question if actively managed stock ETFs are cannibalizing the original mutual fund versions of themselves. Many clone and cousin ETFs are attracting inflows while traditional stock mutual funds remain stubbornly stuck in outflows. Active ETFs have taken some of the edge off those outflows but still have not come close to completely compensating for them.

Firms with at least $1 billion in assets across the nine main equity style box categories saw similar organic decay regardless of whether they offered ETFs or not. Firms that offered only mutual funds shrank about 41% on average since 2019. Meanwhile, firms that offered both mutual funds and ETFs saw an average organic growth rate of negative 54%.

Results varied wildly by firm, however. Value Line was one of the few mutual-fund-only firms that bucked the trend with a roughly 70% organic growth rate over the period. Conversely, Macquarie’s lineup of both ETFs and mutual funds saw a 95% decline in organic growth. To help avoid these extreme outliers, the median may tell a more complete story. This shows firms that offer both mutual funds and ETFs may be staving off outflows slightly better than firms that offer only mutual funds.

Takeaway

Firms offering ETF clones of existing mutual funds have yet to turn their active equity strategies’ flows from net negative to positive, but they may be in a better position to do so in the future if investors’ appetite for ETFs continues to increase.

For investors, doing your homework and knowing what you own remains of vital importance. Investors need to understand if the ETF they are considering is an exact knockoff of a mutual fund or something a little different. Furthermore, the ETF wrapper does not suddenly improve the prospects of active strategies with ill-defined processes, consistent personnel churn, or poor risk controls.