In 2026, here’s what we know about the state of the ETF industry: It’s in full growth mode. Product proliferation has moved so fast, it’s overwhelming due diligence efforts. Differentiation and distribution are popular buzzwords for asset managers. Model portfolios are emerging as plug-and-play solutions for advisors. Active management continues to expand its footprint while blurring the line with passive. And artificial intelligence (AI) is impacting everything we do, everywhere.
This backdrop highlights the many discussions that took place at Exchange 2026 last week:
ETF Industry Growth Spurs Fierce Competition
The numbers are a little daunting. It took us about 24 years to get to the first 2000 ETFs listed in the U.S. It took us just nine years to get to 5000 ETFs. Now, we’re in the face of what many expect to be an incoming avalanche — albeit slow moving — of ETFs as shares of mutual funds.
The fight for investor attention has never been fiercer. It’s no wonder that asset managers are focused on the two “D’s” of ETF success: differentiation and distribution. As ETFs have become the product of choice for most investors, launching ETFs and committing to wrappers long-term, is a must. However, the influx of products have made it increasingly challenging to achieve scale. This is especially true for newcomers.
“We’ve all heard this story: A good idea is not good enough anymore,” Sebastian Jakob, TMX VettaFi chief revenue officer, said at the conference. “If you don’t have a distribution edge before you launch a product, you are likely going to lose.”
That edge is increasingly anchored on the use of robust data. Data is driving decision making with everything from ideation to product development to post-launch distribution efforts. But even a great product with a great story and a robust distribution strategy may find that asset growth can take time. Asset managers need to be prepared to play the long game. “Patience has to be married to conviction,” said Chris Murphy of T. Rowe Price.
Active Management Explodes & Risk Management Remains King
The explosion of active management in ETFs, where active launches outpace passive by about 3-to-1, has been a headline story for a couple of years. We’ve been marveling at the numbers and working hard to identify what’s really active and what’s kind of active, given the ongoing blurring of lines between active and passive strategies.
Active management — as in the classic pursuit of alpha — is a bit of an evolving effort in ETFs. Today, the active category includes a lot of things. This includes 2x single-stock leveraged ETFs, to options-based portfolio solutions, to fundamental “old school” stock-picking from firms like Baron Capital, Davis Advisors, Fidelity, J.P Morgan, and many others.
The many flavors of active management can make navigating the pursuit of alpha tricky. However, there was one takeaway from the active asset managers at Exchange. While not all active management is created equal, risk management is paramount in the current volatile market conditions.
“Going forward, what you don’t own is going to be just as important as what you do,” Dodd Kittsley of Davis Advisors said. He was referring to the value of having an active hand in portfolio management right now.
“Managing downside risk is almost more valuable than picking winning stocks [in today’s market],” Lubna Lundy, of Fidelity Investments, said during a discussion about active management. “Today, it’s about finding smarter, more consistent ways to deliver beyond traditional active management.”
Model Portfolios Take Center Stage Amid ETF Industry Surge
Model portfolios are rising to the occasion as a compelling solution for advisors seeking to outsource asset allocation and find operational efficiency. That’s especially the case for multi-manager models delivering timely tactical tilts around a long-term core portfolio.
“Model portfolios allow [advisors]to focus on the parts of the practice that really matter,” said Tushar Yadava of BlackRock during a session called “The Model Moment: Allocating in a High Dispersion Market.”
As the number of ETFs proliferate, due diligence hurdles increase, and market noise overwhelms, model portfolios offer the ability to be tactical while “institutionalizing discipline” in investing, as Phil Camporeale of J.P. Morgan put it. He also highlighted asset allocation as one of the only asset classes to have delivered above average returns and below average volatility in recent years. Good asset allocation, which can be achieved through well diversified model portfolios, is “how you get clients invested and give them a chance to get out of their own way.”
In other words, be adaptive, not reactive to markets. Models allow you to do just that.
For more news, information, and insights from the Exchange 2026 conference, check out our coverage here.
