“ Issuers are equipping investors with innovative tools that tackle diverse market conditions,” says Maital Legum, director of exchange-traded products at the New York Stock Exchange.

U. S. actively managed ETFs have gained significant inflows, with about 39 % of total ETF flows this year poured into active strategies. The trend reflects the growing interest by investors in tactical management amid market volatility. Active ETFs held approximately $ 1.08 trillion in assets as of May.

“ The term‘ active’ means a lot of different things in the active ETF space,” said Ben Johnson, a CFA and the head of client solutions at Morningstar, on his X social media feed. The active categories with the

largest market share, according to Morningstar data, are discretionary fixed income( 25.3 %), systematic equity( 28.8 %) and discretionary equity( 15.3 %).

The number of active ETFs could be boosted ever further by the relaxation of

certain rules by the Securities and Exchange Commission governing fund share classes. Over the past two years, 60 asset managers have sought the SEC’ s permission to add an ETF share class to existing actively managed mutual funds. The popularity of ETFs is one of the driving factors behind the push, as is their tax-efficiency, which is considered better than that of mutual funds.

The dual share-class structure would operate in two directions. First, mutual funds could issue an ETF share class for an existing active mutual fund. Second, ETFs could add a mutual fund share class, enabling the same underlying portfolio to be accessed by investors in either form.

While ETFs may have broad appeal, they still might not be the right choice for asset managers seeking to limit asset inflows.

In the mutual fund industry, it’ s common for managers to turn away new investors by closing access to funds. This prevents funds from becoming bloated with too much capital too quickly, which might hamper the manager’ s flexibility and edge. In this case, adding an ETF share class might prove disadvantageous, as it would forfeit the fund’ s ability to turn away new money. Overall assets in the U. S. ETF market topped a record high of $ 11 trillion in May. Looking ahead, the addition of ETF share classes could keep the momentum going.

— Ron DeLegge

Income Adjustments Can Soften Medicare Surcharges

Continued from page 10

from the tax-advantaged accounts like the Roth or non-retirement accounts, instead of [ from ] traditional IRAs, to avoid bumping up your MAGI.”

Clients should avoid large capital gains during the years that affect the surcharge.“ If you’ re anticipating a large sum of money, from a business sale or severance, say, try to spread the income across two years,” Seigelstein says.

Since large required minimum distributions can bump up the IRMAA surcharges, one way for clients to reduce the impact( especially if they don’ t need the money) is to make a qualified donation to a charity directly from their IRA.“ The distribution is not included in income and fulfills the RMD,” Pon says.“ This is better than trying to claim a charitable contribution deduction on Schedule A, since most taxpayers claim the standard deduction and don’ t itemize.”

Clients with large capital gains might want to meanwhile harvest losses, Pon says.

— Jeff Stimpson

12 | FINANCIAL ADVISOR MAGAZINE | JULY / AUGUST 2025 WWW. FA-MAG. COM