TWSE Market Insights

＜中文版＞

In recent years, both global and Taiwanese markets have experienced a surge in ETF investments. Starting with market-cap-weighted passive index ETFs, the scope has gradually expanded to include thematic ETFs, leveraged and inverse ETFs, smart Beta ETFs,and ESG ETFs. To meet international trends and offer more diversified investment opportunities for Taiwanese investors, the Financial Supervisory Commission opened the door to active ETFs at the end of 2024. Since May 2025, seven active ETFs have been listed on the Taiwan Stock Exchange, attracting over NTD 50 billion in capital and achieving an average daily trading volume exceeding NTD 1.7 billion. The swift growth of these new ETFs reflects strong investor acceptance and participation.

Compared with traditional mutual funds, active ETFs offer several distinct advantages. Active ETFs can be bought and sold in real time on the stock exchange, providing greater liquidity and eliminating the cumbersome subscription and redemption procedures required by fund companies. They also generally have lower transaction and management fees than traditional mutual funds, helping reduce costs for long-term investors. In addition, active ETFs provide higher transparency by disclosing their daily holdings, allowing investors to clearly understand their asset allocation.

Differing from passive ETFs, active ETFs employ investment strategies managed by professional fund managers who select individual securities and time the market based on research insights and market trends. Known for their efficiency and flexibility, active ETFs retain the trading convenience and cost efficiency of ETFs while adding the adaptability of active management to pursue returns that outperform the market index.

The listing of active ETFs represents a significant expansion of investment options in the financial market, where fund investments is no longer limited to passive ETFs or traditional mutual funds. Observing the U.S. market, the issuers of the five largest market-cap-weighted ETFs and those of the five largest active ETFs do not overlap, indicating that active ETFs have established a distinct competitive segment and opened new opportunities for product development and innovation. In Taiwan, the introduction of active ETFs is expected to attract both domestic and international asset managers, broadening the market and diversifying the investor base. More importantly, in a market previously dominated by passive ETFs, the emergence of active ETFs encourages fund managers with strong research and portfolio management capabilities to demonstrate their expertise. This development also contributes to talent growth within the investment industry.

Since 2025, global equity markets have experienced a significant upswing, with the majority of the seven active ETFs currently listed in Taiwan outperforming the stock market index. This shows that the active strategies of fund managers can indeed create value under specific market conditions. However, looking at the historical experience in the U.S. market over a long period, studies show no significant difference in long-term performance between active and passive ETFs. The key lies in the wide performance span of active ETFs, as some generate impressive returns while others consistently underperform over the long term. Given this, investing in active ETFs does not guarantee profits, as performance largely depends on the fund manager’s skill in strategic decision-making. Investors should also choose products that align with their investment goals. In other words, active ETFs retain the challenges of “selecting the right fund manager” and “selecting the right fund” in traditional fund investing. Investors who focus only on the word “active” may invest too quickly and overlook the risks behind it.

Overall, the introduction of active ETFs has enhanced the diversity of Taiwan’s financial market and provided investors with more asset allocation options. In the future, we expect more innovative ETF products to be launched in Taiwan, such as “buffer ETFs,” which have gained popularity in the U.S for helping investors seize return opportunities while mitigating large price fluctuations.

However, as investment products become more diverse and strategies more complex, investors also need to strengthen their financial literacy and deepen their grasp of investment principles. Before investing in an active ETF, investors should have a clear understanding of the fund’s investment objectives, management approach, and risk profile, and should avoid following market trends without careful evaluation. Only by choosing products that align with their overall asset allocation plan can investors truly benefit from the rewards of financial innovation.