According to ETF Trend data, global assets under management (AUM) in active ETFs reached a record high of US$2.72 trillion as of the end of August 2026. During the first eight months of 2026, actively managed equity ETFs in the United States attracted approximately US$400 billion in inflows. According to a September 27, 2026 report by the Economic Daily News, active ETFs accounted for the largest share of new beneficiaries among Taiwan equity ETFs this year. Together, active ETFs and market-cap-weighted ETFs represented nearly 90% of the total increase in beneficiaries. The growing popularity of active ETFs reflects their structural advantages, particularly in the following two areas:
1. Traditional mutual funds and passive ETFs may be constrained by the industry or product definitions specified in their prospectuses. For example, even among leading companies in the AI server supply chain, some may consistently capture high-yield contracts, while others face the risk of shrinking profit margins.
2. Traditional mutual funds and passive ETFs may adjust their portfolios through periodic reviews and rebalancing, while passive ETFs are also subject to market-capitalization requirements or predefined index rules. These constraints may delay their responses to emerging investment opportunities. In contrast, active ETF managers can promptly adjust their holdings based on the latest chip order data, corporate financial reports, and emerging trends highlighted at major technology conferences, allowing them to reduce exposure to weaker performers and capitalize on stronger investment opportunities.
Daily Portfolio Holdings Disclosure: A Key Structural Advantage of Active ETFs
One less obvious structural advantage lies in the regulatory requirement for ETFs, including active ETFs, to disclose their portfolio holdings on a daily basis. This requirement helps discourage window dressing by investment managers responsible for allocating investors' assets.
The daily portfolio disclosure framework for active ETFs promotes transparency and helps mitigate the potential distortions associated with less frequent disclosure of portfolio holdings and their respective weights. Under a less frequent disclosure regime, fund managers may have incentives to unduly make their portfolios appear more attractive at specific reporting dates. For example, shortly before a financial reporting date, managers may engage in window dressing by purchasing stocks that have already risen in price at relatively high valuations while selling recent underperformers at depressed prices. Such practices can create a misleading picture of the fund's actual investment strategy and portfolio management over time.
When periodic portfolio disclosures fail to accurately reflect fund managers’ true investment capabilities, investors may find it more difficult to distinguish skilled managers from underperforming ones, thereby undermining the market’s ability to reward superior investment management and discipline weaker performers. These practices may also lead to excessive portfolio turnover and unnecessary transaction costs.
Copycat Trading and Front-Running
One seemingly compelling argument against daily portfolio holdings disclosure for active ETFs is that keeping their trading activities confidential could prevent opportunistic market participants from identifying the securities that fund managers are accumulating or reducing. This would help protect funds from the risks of (1) copycat trading or (2) trading strategies designed to exploit or take positions against their portfolio holdings.
However, copycat trading is unlikely to materially increase an ETF’s cost of building positions in large-cap stocks. For highly liquid large-cap stocks, even if a fund manager’s accumulation activities become known to the market, subsequent herding behavior is unlikely to generate sufficient buying pressure to drive share prices significantly higher.
For active ETFs investing in small-cap stocks, on the other hand, withholding daily portfolio disclosures would not necessarily eliminate price impact. Under the concept of rational expectations, changes in buying and selling activity can signal private information to the market, prompting investors to revise their expectations of asset values and thereby generating price impact, even without daily disclosure of portfolio holdings.
More importantly, investors should be cautioned against blindly replicating the previous day’s holdings of successful fund managers. Doing so is much like deciding whether to carry an umbrella today based on forecasts for yesterday's sky conditions.
Regarding trading against disclosed portfolio positions, the Taiwan Stock Exchange’s Operating Guidelines for the Creation and Redemption of Beneficiary Certificates already encompass active ETFs under the rules governing in-kind creation and redemption, with clearly defined procedures for the daily disclosure of their securities portfolios.
Although Authorized Participants (APs), having access to information regarding a fund’s portfolio holdings, may be motivated to engage in arbitrage activities for profit, such arbitrage actually helps keep ETF market prices closely aligned with their net asset values (NAVs). Specifically, trading against an active ETF’s portfolio positions may help reduce the costs of building positions or minimize losses associated with reducing holdings.
The Proxy Portfolio Disclosure Mechanism Used in Overseas Markets May Be Difficult to Implement in Taiwan
In terms of assets under management, fully transparent active ETFs that disclose their complete portfolio holdings daily dominate the U.S. market, currently accounting for approximately 98% of total active ETF assets. This market dominance reflects their advantages over semi-transparent and non-transparent active ETFs, which together account for only approximately 2% of the market.
In overseas markets, semi-transparent active ETFs that do not disclose their full portfolio holdings daily are often required to publish a proxy portfolio before the opening of each trading day. This proxy portfolio is designed to be highly correlated with the fund’s actual holdings, typically with a correlation coefficient ranging from 95% to 99%, while not revealing the exact portfolio composition.
However, although Taiwan’s equity market has a substantial total market capitalization, the number of listed companies remains relatively limited compared with the United States, where New York Stock Exchange (NYSE) and Nasdaq each has more than 3,000 listed companies. Taiwan also has fewer companies within individual industries, partly reflecting the smaller scale of its domestic markets for goods and services.
Consequently, in quite a few industries, it is difficult to identify genuinely comparable companies with similar business operations using the Standard Industrial Classification (SIC) system. Even where suitable comparable companies can be identified, sophisticated investment professionals at competing firms may still be able to infer the investment factors favored or avoided by a fund manager building or reducing positions, or even identify the fund’s core holdings.
Therefore, while proxy portfolio disclosure mechanisms may be feasible in overseas markets, their practical application in Taiwan could face significant challenges.
In conclusion, daily portfolio holdings disclosure for active ETFs helps effectively protect the interests of retail investors while fostering the AUM growth of high-quality funds.