Is Your Active ETF a Cousin or an Identical Twin?

A popular investment vehicle has expanded its scope, creating opportunities for investors—and for asset managers. But take a close look before diving in.

For years, exchange-traded funds were synonymous with passive investing. By and large, asset management firms that focused on actively managed portfolios stuck with the conventional mutual fund structure. One reason: ETFs typically disclose their portfolios daily. That was anathema to active managers who prefer to keep their moves hidden until required to disclose them weeks or months later. Actively managed ETFs were few and far between.

That has changed. In the past few years, the number of active ETFs has exploded.

Advisors like the ETF structure; among other benefits, ETFs offer better tax efficiency and can be easier to trade. Fund firms, tired of watching money flow out of their mutual funds while ETFs raked in the cash, decided to embrace the format.

Some firms converted their actively managed mutual funds to ETFs. But for a variety of reasons, many other asset managers pivoted to “cousins”: an ETF whose portfolio is similar, but not identical, to the same manager’s mutual fund.

The cousin format can benefit both investors and fund firms. But it’s worth seeing how that approach manifests itself in practice. Sometimes the ETF simply excludes some of the mutual fund’s holdings; sometimes the ETF owns companies the mutual fund does not. Cash stakes can vary. Differences in performance may result.

Below are a few prominent examples of such cousins—plus one pair that rejected that approach. The bottom line: Know what you own, so you won’t be surprised.

MFS Value MEIIX and MFS Active Value ETF MFSV

MFS Value has racked up quite a record over the nearly 20 years that Nevin Chitkara has managed it. Chitkara is retiring next year, but the fund will remain in good hands.

In December 2024, MFS launched an ETF version. But MFS Active Value ETF—which discloses all its holdings daily—isn’t a clone of MFS Value. In its July 31, 2025, portfolio, it owned 59 stocks, 13 less than its mutual fund cousin. Moreover, the ETF didn’t simply omit 13 of the mutual fund’s holdings and call it a day. The ETF was missing at least 20 of the mutual fund’s stocks and owned seven companies that the mutual fund lacked.

In some cases, the differences seem like clear substitutions. For example, the mutual fund had 1.8% of assets in Lowe’s LOW; the ETF had a nearly identical amount in Home Depot HD. The mutual fund owned Marriott MAR and Kimberly-Clark KMB; the ETF countered with Hilton HLT and Procter & Gamble PG.

These may seem like distinctions without a difference. Comanager Katie Cannan told Morningstar that the team likes all the companies owned in both vehicles. It’s true that in many cases, stock prices of large companies in the same field move more or less in tandem. But that’s far from guaranteed. Check out the performance of Merck MRK versus Eli Lilly LLY. Or Airbus EADSY versus Boeing BA.

The differences can have an impact: Through September this year, the mutual fund’s institutional shares gained 10.8 % for the year to date, while the ETF rose 11.4%.

Principal Blue Chip PBCKX and Principal Focused Blue Chip ETF BCHP

Principal went in a different direction in building an exchange-traded version of its successful Principal Blue Chip mutual fund. As with the MFS Value pair, this ETF also owns fewer stocks than its cousin. But manager Bill Nolan doesn’t try to find substitutes. Instead, in its July 31 portfolios, the ETF simply omitted 16 stocks that appeared in the mutual fund. That left the ETF with just 24 holdings. Focused indeed.

Investors familiar with the mutual fund might be wary of a related vehicle that’s even more concentrated. After all, in the July portfolio, Principal Blue Chip held just 40 stocks and stashed nearly 27% of its assets in just two companies, Microsoft MSFT (14.7%) and Amazon.com AMZN (12.1%). The ETF had even larger stakes in those stocks, with 15.4% of assets in Microsoft and 14.3% in Amazon. Even more eye-catching was the weighting difference in the funds’ number-three holding, Brookfield Business BBUC. The ETF had 9.1% of assets in that firm, versus just 5.8% in the mutual fund.

The result: noteworthy differences in performance. In 2024, the 21.5% gain posted by the mutual fund’s institutional shares outpaced the ETF by about 90 basis points, and in 2025 through September, the mutual fund again led: 11.2% to 10.6%.

Oakmark Fund OAKMX, Oakmark Select OAKLX, and Oakmark U.S. Large Cap ETF OAKM

Unlike the above cases, Harris Associates didn’t wait for the active-ETF frenzy to arrive before offering a more compact alternative to its successful Oakmark Fund. Way back in 1996, it launched Oakmark Select, run by acclaimed lead manager Bill Nygren with the same general approach but with a smaller portfolio and heftier stock weightings. Now, there’s a third version available to investors.

With the new Oakmark U.S. Large Cap ETF, Harris Associates split the difference between the existing mutual funds. With 36 holdings in its end-of-June portfolio, the ETF had 21 fewer stocks than Oakmark Fund but 11 more than Oakmark Select.

In the stocks it shared with Oakmark Fund, the ETF assigned higher weightings; in some cases, more than 100 basis points higher. The distinctions were even sharper versus Oakmark Select. While the ETF only owned one stock that Oakmark Fund lacked (CVS Health CVS, at less than 2% of assets), it held at least 20 names missing from Oakmark Select. Conversely, Oakmark Select’s 25 holdings included nine firms excluded from the ETF. Two of these, Lithia Motors LAD and Salesforce CRM, comprised nearly 10% of Oakmark Select’s assets.

Finally, the ETF had just 2.6% of assets in cash, while the two mutual funds each kept around 5% on the sidelines. It also lacked the handful of small-cap names peppering the others’ portfolios.

The result of all these differences? A sharp divergence in performance. Through September, Oakmark Fund’s Investor shares posted a year-to-date return of 8.9%, far outpacing Oakmark Select’s 5.4% gain—while the new ETF left them both in the dust, soaring 13.9%.

Perhaps such divergence should be expected, given how different these portfolios are from one another. Even the stocks they do share often carry vastly different weightings.

Anyone considering one of these Oakmark funds should consider carefully which one they’re most comfortable with. The ETF’s technical advantages shouldn’t be the only factor in mind.

Fidelity Magellan and Fidelity Magellan ETF FMAG

Here’s the outlier. With this pair, Fidelity chose a less-popular path: the semitransparent model. Rather than offer a pared-down version of Sammy Simnegar’s Fidelity Magellan mutual fund, the firm simply put Magellan’s entire portfolio into the ETF. But Simnegar is an active trader running a large, well-known fund, and the firm didn’t want everyone knowing exactly what he had bought or sold each day. So this ETF does not disclose its portfolio daily. It has the same delayed release schedule as the mutual fund.

For investors, the disadvantage of that practice is that they can’t know what’s in the ETF’s portfolio when they buy it, as they can with a fully transparent ETF. However, on the positive side, this approach means that investors who like the mutual fund can rest assured that they’re getting a near-exact replica when they buy the ETF.

As Time Goes By

As active ETFs age, it will be interesting to observe how much, and in what ways, their returns differ from the performance of their mutual fund cousins. (If they are indeed cousins rather than identical twins.) For now, the key is to be aware of the portfolio differences where they occur and to include that knowledge in any investment decisions involving these intriguing and promising vehicles.

A previous version of this article was published Sept. 17, 2025.