More money managers are diving into the ETF space as the fund structure helps keep tax bills low, and paperwork and distributions are also lower than traditional open-end mutual funds. The savings are then passed onto investors in the form of lower investment fees.

Further momentum in the active ETF space will come down to performance. While the inability of equity fund managers to beat the market over the long-term has been proven by academic research, bond managers may have more leeway. Debt markets are more diverse and broad benchmarks lean toward low-yielding government bonds, so active management has an opportunity to beat the benchmarks, especially in a rising rate environment.

Moreover, active bond ETF managers are less loath to publish holdings on a daily basis due to the vast quantity of debt securities floating around.

“If you want to trade Apple equity, there is only one security to buy, but if you want to trade Apple bonds, you have a choice of different maturities, a choice of different currencies,” Sherman said. “Transparency is not an issue when you have a large number of portfolio securities.”

For more information on active ETFs, visit our actively managed ETFs category.