Active ETFs shift from scale to substance

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TCW sees flows signalling a deeper shift as advisors move beyond static allocations toward strategies defined by process, flexibility, and long-term portfolio resilience

MARKETS HAVE become harder to sit still in. That is one of the clearest changes in the ETF business over the past five years. Price moves are sharper. Leadership changes faster. Rate expectations shift abruptly. For advisors, that has changed the portfolio construction conversation. The old model of building with broad beta exposures and adjusting them periodically has not disappeared, but it has become less efficient. “I just got off a call with a client holding a fairly static portfolio,”

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Active ETFS: The shift in numbers

Share of ETF inflows to active, 2026

57%

“You can certainly build with beta building blocks. But it is more efficient to let an active manager handle duration, credit quality, and sector exposure within the portfolio”

Scott Dennis, TCW

says Scott Dennis, who oversees TCW’s ETFs division recounts, pointing to it as the perfect illustration of what he’s seeing. “Rates sold off, then rallied,” he notes. “You can see 2 or 3 percent moves in a day. If you’re in a static portfolio, you’re riding that. You don’t have the ability to pivot.” Active ETFs are moving closer to the center of growth, capturing a rising share of inflows and an increasing share of product launches. For asset managers, the competition is no longer just about scale, shelf space, or price. It is increasingly about whether a strategy can justify its role in a portfolio, the manager can deliver repeatable results, and the wrapper is being used in a way that adds real value for advisors. “Wealth investors need to think about portfolio construction differently,” said Dennis. “Markets are moving fast. They need tools like ETFs to navigate that much more quickly.”

Why active is taking share Dennis frames the current moment as part of a longer evolution in how ETFs are used. Earlier in the market’s development, advisors often built portfolios with passive ETFs and then actively rotated among them. That approach made sense when exposures moved more gradually and the cost of repositioning was easier to absorb. “As markets became more volatile, you had to trade those beta ETFs more often, and that embeds transaction costs,” Dennis says. That has created an opening for active ETFs across both fixed

Not all growth is the same As active ETFs gather momentum, the competitive question for asset managers is changing. The easy story in ETFs used to be scale. Bigger platforms won on distribution, brand recognition, and cost. Those advantages still matter, particularly in core beta. But in active, the standard is less forgiving. Advisors want performance, but they also want evidence that the performance can hold up across market regimes. “You have to prove that you are a good alpha1-generating portfolio manager and that you have a process to go along with that,” Dennis says. “Anyone can have six months of success. Advisors need to look at how a firm has managed assets over time.” That is especially important in a market where some products can gather assets quickly without necessarily proving durable adoption. Dennis makes the point that headline asset growth does not always tell the full story. Some strategies gather scale quickly through internal allocations or affiliated platforms. That can create the appearance of traction without reflecting broad adoption.

“TCW’s FLXR has had 83 straight weeks of inflows as of March 31, 2026,” Dennis says. “That is not one or two big trades. That is advisors adopting it over time.” Assets in the strategy now sit just above $2.8 billion, as of March 31, 2026, built through steady contributions rather than large, concentrated allocations. That kind of growth, he argues, tends to produce a more stable investor base. The steady accumulation also suggests a different use case. The product is not being traded around. It is being held.

Where firms like TCW are leaning in For firms built around active management, the shift toward ETFs is less about changing what they do and more about how they deliver it. TCW, long known for its fixed income platform and relative value approach, has been working on its ETF lineup over the past two years. “We are not expanding how we manage money,” Dennis says. “We are embedding that philosophy in a different wrapper.” As the ETF market matures, the distinction between wrapper and strategy is becoming more explicit. Advisors are not just evaluating what a fund owns. They are evaluating whether the structure supports how it is managed.

Published April 23, 2026

“Sustained momentum and sticky assets, driven by repeat use and long-term positioning, are stronger indicators of durable adoption than headline growth alone”

Scott Dennis, TCW

Prior year

38%

Flows versus assets

Share of total ETF assets

11%

Active ETFs, what actually matters

Broad, steady inflows > large, one-off allocations

Adoption quality

Process

Repeatable across cycles, not tied to one environment

Portfolio role

Reduces trading, manages exposures internally

Product discipline

Fewer strategies, built on clear edge

Dennis draws a clear distinction. “Building scale early in an ETF’s lifecycle can be important, and issuers will often support that process initially. Over time, the more meaningful signal is whether adoption broadens and persists, with an asset base that grows through steady, diversified inflows rather than a narrow set of early allocations,” he says. “Sustained momentum and sticky assets, driven by repeat use and long term positioning, are stronger indicators of durable adoption than headline growth alone.” He points to TCW’s Flexible Income ETF (FLXR) as an example of the latter pattern.

income and equity strategies. In fixed income, changes in duration, sector positioning, and credit exposure can have an immediate impact on outcomes. In equities, faster shifts in leadership, dispersion, and factor dynamics have made static exposure harder to rely on. Rather than managing those levers from the outside through a series of ETF trades, advisors are increasingly looking inside the fund. “You can certainly build with beta building blocks,” Dennis says. “But it is more efficient to let an active manager handle duration, credit quality, and sector exposure within the portfolio.” That efficiency argument matters. It is not just about preferring active over passive in the abstract. It is about whether an advisor wants to keep making those allocation decisions trade by trade or delegate them to a manager with a clear framework and daily responsibility for the portfolio. That helps explain why active ETFs, while still a modest share of total ETF assets, are gathering a much larger portion of new money. Dennis noted that active strategies accounted for 38 percent of ETF inflows last year and roughly 57 percent so far in 2026. The asset base is still smaller than passive, but the direction of travel is no longer in doubt.

In fixed income, that often comes down to how quickly a portfolio can adjust to changes in spreads, duration, or credit conditions. In equities, it can involve how a thematic strategy develops as underlying drivers shift. “The theme might stay the same,” Dennis says. “But the components can change over time.” That flexibility is increasingly part of the value proposition.TCW’s approach has been to stay focused on areas where it already has an established edge. “We’re not going to innovate for the sake of it,” Dennis says.

A more selective phase What is emerging is a more demanding standard for what qualifies as success in the ETF market. Performance still draws attention. The TCW Transform Systems ETF (PWRD), which ranked at the top of its peer group last year by Morningstar,2 is a case in point. But strong results alone do not explain how assets build or whether they remain in place. Sustained momentum and demand are more often tied to how an active thematic strategy is positioned in portfolios and whether it continues to meet a repeatable allocation need over time. In PWRD’s case, demand has reflected its role as a differentiated equity allocation tied to long‑term structural themes rather than short‑term trading interest. For TCW, the more telling signal is how flows develop over time. Rather than being driven by large, episodic allocations, capital has come in more steadily across its ETF lineup, reflecting broader adoption rather than concentrated positioning. That distinction is shaping how the firm approaches product development. With 12 ETFs currently in market and additional strategies in progress, the focus is not on expanding the shelf but on building strategies where the firm has a repeatable edge and can sustain assets over time. “We’re focused on what we can sustain,” Dennis says, “not just what we can launch.”

1 Alpha – A measure of active return on investment in excess of benchmark index. 2 Morningstar U.S. Large Blend Fund Category (out of 1,317 Funds). Ranked as a Top 10 Performing Stock ETF, returning 32.58% for the 1-year time period vs the S&P 500 at 17.88%. The actively managed TCW ETF beat the 15.52% gain on the average fund in Morningstar’s large blend category for the year. Over the last three years, the fund has gained 27.23%, outperforming the 20.07% gain on funds in its category, placing it in the third percentile for the period. (Source: Morningstar Direct 12/31/2025) Peer group is US Large Blend Category, 1,317 funds. Top1 percentile. The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted. For the most recent month end performance please visit etf.tcw.com. Morningstar classifies funds into categories based on similar investment objective and strategy. Morningstar percentile rankings are based on a fund's total return compared to its Morningstar Category of exchange-traded and open-end mutual funds. The highest percentile rank is 1 and the lowest percentile rank is 100. The fund’s rankings may have been lower were it not for fee waivers in effect during the ranking periods. Rankings are relative to a peer group and do not necessarily mean the fund had high or positive total returns. Morningstar updates its fund rankings daily. Past performance does not guarantee future results.

Disclosure:Investing Involves Risk and Possible Loss of Principal. Distributed by Foreside Financial Services, LLC. Before investing, you should carefully consider the fund’s investment objectives, risks, charges, and expenses. This and other information is in the prospectus, a copy of which may be obtained from etf.tcw.com. Please read the prospectus carefully before you invest. As with any investment, you could lose all or part of your investment in the Funds, and the Fund’s performance could trail that of other investments. The Funds are subject to certain risks, including the principal risks noted below, any of which may adversely affect the Fund’s net asset value (“NAV”) per share, trading price, yield, total return, and ability to meet its investment objective. TCW Transform Systems ETF (PWRD) is actively managed and may be susceptible to an increased risk of loss, including losses due to adverse events that affect the Funds’ investments more than the market as a whole, to the extent that the Funds’ investments are concentrated in the securities of a particular issuer or issuers, country, group of countries, region, market, industry, group of industries, sector, or asset class. Shares are subject to the risks of an investment in a portfolio of equity securities in an industry or group of industries in which each Fund invests. Investments in emerging market countries may be subject to greater risks than investments in developed countries. The Funds may purchase and write put and call options on futures contracts that are traded on an exchange as a hedge against changes in value of its portfolio securities, or in anticipation of the purchase of securities, and may enter into closing transactions with respect to such options to terminate existing positions. There is no guarantee that such closing transactions can be effected. TCW Flexible Income ETF (FLXR) seeks a high level of current income with a secondary objective of long-term capital appreciation. The Fund is an actively managed exchange traded fund that seeks to pursue its objective by utilizing a flexible investment approach that allocates investments across a range of global investment opportunities related to credit, currencies, and interest rates. TCW Flexible Income ETF (FLXR) is subject to the following risks: High yield securities may be subject to greater fluctuations in value and risk of loss of income and principal than higher-rated securities. It is important to note that the Fund is not guaranteed by the U.S. Government. Fixed income investments entail interest rate risk, the risk of issuer default, issuer credit risk, and price volatility risk. Funds investing in bonds can lose their value as interest rates rise and an investor can lose principal. The Fund’s investments denominated in foreign currencies will decline in value if the foreign currency declines in value relative to the U.S. dollar. Fund share prices and returns will fluctuate with market conditions, currencies, and the economic and political climates where the investments are made. The securities markets of emerging market countries can be extremely volatile. Mortgage-backed and other asset-backed securities often involve risks that are different from or more acute than risks associated with other types of debt instruments. MBS related to floating rate loans may exhibit greater price volatility than a fixed rate obligation of similar credit quality. With respect to non-agency MBS, there are no direct or indirect government or agency guarantees of payments in pools created by non-governmental issuers. Non-agency MBS are also not subject to the same underwriting requirements for the underlying mortgages that are applicable to those mortgage-related securities that have a government or government-sponsored entity guarantee. Liquidity Risk: Lack of a ready market or restrictions on resale may limit the ability of the Fund to sell a security at an advantageous time or price. The liquidity of the Fund’s assets may change over time. Derivatives Risk: A derivative is a financial contract, the value of which depends on or is derived from the value of an underlying asset such as a security or an index.

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