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Fixed income

ETF trends and trading best practices

August 27, 2026 - 4 min
Tyler A. Williams, CETF
Vice President, ETF Capital Markets and Product – Natixis Investment Managers – US Distribution

NICK ELWARD: Last year, Tyler, we saw 1,000 new ETF launches, which was a record. And this year so far, we're on pace to beat that record. Of that 1,000 and the large number so far this year, about 80% are actively managed ETFs. If you look at active ETFs in terms of what they represent for the overall ETF market, it's about 12% of assets, but they're accounting for about a third of the flows.

And this year, fixed income is a big part of that. If you look at the actively managed fixed income flows, that's about 50% of all fixed income flows in ETFs.

TYLER WILLIAMS: It's a big number. Wow.

TYLER WILLIAMS: Sure fixed income is actually one of the best use cases for active managers and for a few reasons. One, the typical benchmark that most active strategies are benchmarked to. The Bloomberg Aggregate bond index, only covers about half the bond market and misses out on those plus sectors that include high yield, non-agency MBS, and parts of the securitized space. So the index itself only captures a smaller portion of the whole universe, and the way it's weighted is flawed by design. It's weighted by issuance. So the biggest borrowers get the biggest weights, not optimized for risk, liquidity, or value. 

So for an active manager, especially within that core plus and multisector space, they can go beyond the index to drive yield, diversification, and flexibility. There's clear alpha levers between sector rotation, curve positioning, and underlying security selection, especially in less efficient markets.

NICK ELWARD: But also, if I look at what financial advisors, investors, and institutions are talking about and where they're putting their money, it definitely seems to be the trend for the next 12 months. I look at one other element that we haven't talked about, and that's fees. If you look at the fees of active fixed income ETFs, they're getting extremely attractive and competitive. And I think that's one of the drivers that's moving more financial advisors and other investors into active fixed income.

TYLER WILLIAMS: Sure, Yeah, very important for implementation, not just the strategy, but how to actually get into the strategy. For ETFs in general, not just fixed income but all ETFs, you have to rethink liquidity. It's not driven as much by on screen volume that you might see or even the AUM of an ETF but more on that underlying portfolio liquidity, which is kind of why the capacity might be actually much deeper than it looks on the surface. 

For clients that want to trade on screen for smaller orders, recommend that they avoid the open and close when there might be more dislocations in price and use limit orders to protect their ultimate execution price as opposed to market orders. For larger orders, firms like Natixis that have ETF cap markets desk, can be very helpful to guide investors as to what order type might make the most sense, and we can work with our underlying market makers and liquidity providers to provide a fair price during the day.

The exchange-traded fund (ETF) market is evolving quickly, and active strategies are leading the next growth phase. Although active ETFs still represent a relatively small share of total ETF assets, they are capturing a disproportionate share of investor flows, particularly in fixed income. For advisors and investors seeking income, flexibility, and active risk management, the combination of active management and the ETF vehicle is proving increasingly compelling. As adoption accelerates, understanding where active fixed-income ETFs may offer advantages and how to trade them effectively is becoming an important part of portfolio construction.

Key takeaways:

  • Active ETFs are driving the industry’s growth story: Active ETFs account for roughly 12% of ETF assets but are attracting about one-third of all ETF flows. This year, active fixed-income ETFs alone have gathered approximately half of all fixed-income ETF flows, highlighting strong investor demand.
  • Fixed income is especially well suited to active management: Traditional bond benchmarks such as the Bloomberg U.S. Aggregate Bond Index cover only part of the investable universe and are weighted by debt issuance rather than investment merit. Active managers can expand beyond benchmark constraints to access additional sources of yield, diversification, and risk-adjusted return potential.
  • Multiple levers create opportunities for alpha: Sector allocation, yield-curve positioning, and security selection can be particularly valuable in less efficient areas of fixed-income markets, where active managers may have greater opportunities to add value.
  • Fees have become increasingly competitive: The cost difference between active and passive fixed-income ETFs has narrowed, making active approaches more accessible for a broader range of investors.
  • ETF liquidity extends beyond what appears on screen: Trading volume and assets under management tell only part of the story. The liquidity of the underlying bond portfolio often provides greater trading capacity than investors might assume.
  • Implementation matters: For smaller trades, investors may benefit from using limit orders and avoiding the market open and close. Larger trades may warrant working with ETF capital markets specialists and liquidity providers to help optimize execution.

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The information, data, analyses, and opinions presented herein (including current investment themes, the portfolio managers' research and investment process, and portfolio characteristics) are for informational purposes only and represent the views of the speakers as of May 2026 and are subject to change without notice. This content is not a recommendation of or an offer to buy or sell a security and is not warranted to be correct, complete, or accurate.

Diversification does not guarantee a profit or protect against a loss.

All investing involves risk, including the risk of loss of principal. Investment risk exists with equity, fixed income, private investing, and alternative investments. There is no assurance that any investment will meet its performance objectives or that losses will be avoided.

This material is for informational purposes only and should not be construed as investment advice.

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